Saturday, April 17, 2010

China property cooling timely: Cheung Kong

CHEUNG Kong (Holdings) Ltd, the Hong Kong developer controlled by billionaire Li Ka-shing, said efforts by China to cool its property market are ‘timely’ after record price gains.

‘You want to take action before the market gets too hot,’ Justin Chiu, executive director of Cheung Kong, said in a Bloomberg Television interview yesterday. ‘Prices have gone up really quite a lot; people buying for their own use should do it within their means. If they invest, they need to be cautious about interest rates.’

China, the world’s third-biggest economy, on Thursday raised mortgage rates and downpayment ratios for some home purchases, with the nation’s Cabinet saying ‘more forceful’ steps are needed to cool speculation after property prices rose at a record pace. Residential and commercial real-estate prices in 70 cities climbed 11.7 per cent from a year earlier in March.

Downpayments for second homes must be at least 50 per cent, up from 40 per cent, and interest rates can’t be lower than 110 per cent of benchmark rates, the State Council said in a statement, citing decisions made during a meeting on April 14.

Banks should also raise downpayment ratios and rates for third homes ‘by a broad margin’.

The higher downpayment for second homes ‘is good for the healthy development of China’s property market in the long term’, Vincent Lo, the Hong Kong billionaire who controls Shanghai-based developer Shui On Land Ltd, told reporters yesterday. ‘We don’t support property speculation.’

The State Council said local governments have failed to control speculation. China’s economy grew 11.9 per cent in the first quarter, the fastest pace in almost three years, a report showed on Thursday, fanning concern that record lending is creating asset bubbles.

Cheung Kong’s revenue from China, including its share of joint venture projects, jumped 77 per cent last year to HK$6.68 billion (S$1.2 billion), the developer said on March 30.

Cheung Kong lost 2.09 per cent to HK$103.30 yesterday. The shares have gained 3.6 per cent this year, compared with a 0.1 per cent drop in the Hang Seng Property Index.

China will accelerate the study and drafting of tax measures that will guide home purchases, the State Council said in an April 14 statement.

The nation may introduce a property tax in the ‘near future’ as it seeks to control surging prices, Merrill Lynch & Co, a unit of Bank of America Corp, said in an April 15 report.

‘If the market is getting too hot, it may be a timely measure too,’ Cheung Kong’s Mr Chiu said yesterday. In Hong Kong, home prices may correct when interest rates rise, Mr Chiu felt.

‘I would see that there’s a bubble, but most people see that’s a reflection of a healthy economy,’ Mr Chiu said. ‘So I’m not going to comment whether it’s a bubble or not.’

In Singapore, where Cheung Kong is developing office and residential properties, Mr Chiu said real estate price gains can ‘sustain at least at this level because the fundamentals are very strong’.

Source: Business Times, 17 Apr 2010

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