- April 2014 Vol.6 No.4

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Tier I vs tier II: In the game of tiers, second-tier Chinese cities have much to offer property investors

by Terence Loh

Institutional foreign capital has been investing in China real estate for more than 10 years and one of the perennial debates has been over city selection: First-tier versus second-tier, which is better?

It is possible to invest in, successfully exit and generate attractive returns from real estate projects in both first- and second-tier cities.

And while there are many benefits of investing in first-tier cities — such as liquidity, depth of market and greater transparency — over the years, first-tier cities have also become crowded with foreign and local investors bidding for similar projects. For investors who have the ability to source real estate opportunities directly in second-tier cities, the overall market dynamics are favourable compared with the average transaction in a first-tier city.

For instance, second-tier cities, such as provincial capitals and other large, fast-growing cities, offer the fo

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