Total foreign investment in Sino-S'pore project hits 28b yuan
(TIANJIN) The Philippines' largest property company, Ayala Land, has become the fourth foreign real estate developer to join an 'eco-city' development project in north China's Tianjin Municipality.
The company signed an agreement to invest US$220 million in the project on Tuesday, taking total foreign investment in the 'eco-city' to 28 billion yuan (S$5.6 billion).
Other foreign property developers involved include Mitsui Fudosan Group and Sunway Real Estate Investment Trust, said Wu Caiwen, president of the Sino-Singapore Tianjin Eco-City Investment and Development.
The Tianjin 'eco-city' development is the second of its kind between the Chinese and Singapore governments, following on from the China-Singapore Suzhou Industry Park.
Both projects feature cooperation in advanced technology and personnel exchange.
Located in the Tianjin Binhai New Area, the 30 square kilometre Tianjin Eco-City lies 150 km east of Beijing. It is hoped that the city would become a harmonious and sustainable community that meets the needs of China as it urbanises.
'The Tianjin Eco-city aims to be a model for the cities of China's future, as well as being a real international eco-city,' Mr Wu said.
The 'eco-city' is 50 km away from downtown Tianjin. It is designed to be a modern metropolis where 350,000 residents can live, work and play by the time it is completed in 2020.
Ayala Land has agreed to develop a 9.78 hectare residential complex in the city designed to accommodate 1,100 households by 2013.
Mr Wu said that all buildings in the eco-city conform with environmentally friendly standards in design, technology, construction and management. 'The foreign developers' experience in building environmentally friendly properties will help push forward the project and allow it to meet its eco-targets.' - Xinhua
Source: Business Times, 5 Aug 2010
Showing posts with label Overseas Property - China. Show all posts
Showing posts with label Overseas Property - China. Show all posts
Thursday, August 5, 2010
Tuesday, August 3, 2010
A China real estate bubble built on conflicting policy
Top state-owned banks may be sitting on enormous unreported debt
(WUHU) The Anhui Salt Industry Corp is a state-owned company that has 11,000 employees, access to government salt mines and a Communist Party boss.
Now it has swaggered into a new line of business: real estate.
The company is developing a complex of luxury high-rises here called Platinum Bay on a parcel it acquired last year by outbidding two other developers to win a local government land auction.
Anhui Salt is hardly alone among big state-owned companies. The China Railway Group is developing residential complexes in Beijing after winning the auction for a huge piece of land there.
Likewise, the China Ordnance Group, a state-led military manufacturer best known for amphibious assault weapons, paid US$260 million for Beijing property where it plans to build luxury residences and retail outlets.
And in one of China's biggest land deals yet, the state-run shipbuilder Sino Ocean paid US$1.3 billion last December and March to buy two giant tracts from Beijing's municipal government to develop residential communities.
All around the nation, giant state-owned oil, chemical, military, telecom and highway groups are bidding up prices on sprawling plots of land for big real estate projects unrelated to their core businesses.
'These are the ones that have the money to buy the land,' said Deng Yongheng at the National University in Singapore. 'Because in China, it's the government that controls the money supply and the spending.'
By driving up property prices, the state-owned companies, which are ultimately controlled by the national government, are working at cross-purposes with the central government's effort to keep China's real estate boom from becoming a debt-fuelled speculative bubble - like the one that devastated Western financial markets when it burst two years ago.
Land records show that 82 per cent of land auctions in Beijing this year have been won by big state-owned companies outbidding private developers - up from 59 per cent in 2008.
A recent study by the National Bureau of Economic Research in Cambridge, Massachusetts, found that land prices in Beijing had jumped by about 750 per cent since 2003 and that half of that gain came in the last two years. Housing prices have also skyrocketed, doubling in many cities over the last few years.
The report pegged a big part of the increase to state-owned enterprises that have 'paid 27 per cent more than other bidders for an otherwise equivalent piece of land'. Critics say the central government in Beijing unwittingly propelled the land frenzy by pushing a huge US$586 billion economic stimulus package last year and encouraging state-owned banks to lend more aggressively.
And as the prices of new apartments soar - in Shanghai, for instance, they exceed US$200,000, while the average disposable income is only about US$4,000 a year - the trend also threatens to undermine the central government's social goal of affordable housing for the rising middle class.
In some cases, local governments - which earned more than US$230 billion from land auctions in 2009 - are also being accused of demolishing old neighbourhoods and unfairly compensating residents. In a recent poll conducted by China Youth Daily, a state-run newspaper, more than 80 per cent of the respondents said local governments were a 'major driving force' behind the skyrocketing property prices.
All of this is happening to the chagrin of private developers that dominated China's property market for more than a decade but are now feeling squeezed out of a game that favours developers with state-backed financing.
'It's a little like a son who borrows money from his mother,' said Yang Shaofeng, head of the Conworld Real Estate Agency in Beijing.
Last year, state banks made a record US$1.4 trillion in loans, nearly twice as much as the year before. Analysts now say they believe much of that money was diverted into the property market through off-balance-sheet manoeuvres, leading to the record land bids and soaring property prices.
That belief is adding to concerns that some of China's biggest state-owned banks may be sitting on enormous unreported debt.
Beijing is now struggling to rein in credit without slowing the nation's roaring economy. And regulators are trying to stop state banks from using clever manoeuvres to secretly lend money to overly aggressive state-owned developers.
Beijing also wants to restrain state companies that have little or no expertise in real estate. Last March, the State Assets Supervision and Administration Commission - one of the national government's most powerful bodies - ordered 78 state-owned companies to shed their real estate divisions.
But analysts say the government will have difficulty stopping hundreds of state-owned companies and their various subsidiaries from participating in what has become one of the country's hottest industries.
Experts say that more than 90 of the 125 state-owned companies directly under Beijing's control still have property divisions. And local and provincial governments control many additional developers.
The national government is grappling with a complex set of incentives that drive state-run companies to speculate in the property market with the aid of local governments. - NYT
Source: Business Times, 3 Aug 2010
(WUHU) The Anhui Salt Industry Corp is a state-owned company that has 11,000 employees, access to government salt mines and a Communist Party boss.
Now it has swaggered into a new line of business: real estate.
The company is developing a complex of luxury high-rises here called Platinum Bay on a parcel it acquired last year by outbidding two other developers to win a local government land auction.
Anhui Salt is hardly alone among big state-owned companies. The China Railway Group is developing residential complexes in Beijing after winning the auction for a huge piece of land there.
Likewise, the China Ordnance Group, a state-led military manufacturer best known for amphibious assault weapons, paid US$260 million for Beijing property where it plans to build luxury residences and retail outlets.
And in one of China's biggest land deals yet, the state-run shipbuilder Sino Ocean paid US$1.3 billion last December and March to buy two giant tracts from Beijing's municipal government to develop residential communities.
All around the nation, giant state-owned oil, chemical, military, telecom and highway groups are bidding up prices on sprawling plots of land for big real estate projects unrelated to their core businesses.
'These are the ones that have the money to buy the land,' said Deng Yongheng at the National University in Singapore. 'Because in China, it's the government that controls the money supply and the spending.'
By driving up property prices, the state-owned companies, which are ultimately controlled by the national government, are working at cross-purposes with the central government's effort to keep China's real estate boom from becoming a debt-fuelled speculative bubble - like the one that devastated Western financial markets when it burst two years ago.
Land records show that 82 per cent of land auctions in Beijing this year have been won by big state-owned companies outbidding private developers - up from 59 per cent in 2008.
A recent study by the National Bureau of Economic Research in Cambridge, Massachusetts, found that land prices in Beijing had jumped by about 750 per cent since 2003 and that half of that gain came in the last two years. Housing prices have also skyrocketed, doubling in many cities over the last few years.
The report pegged a big part of the increase to state-owned enterprises that have 'paid 27 per cent more than other bidders for an otherwise equivalent piece of land'. Critics say the central government in Beijing unwittingly propelled the land frenzy by pushing a huge US$586 billion economic stimulus package last year and encouraging state-owned banks to lend more aggressively.
And as the prices of new apartments soar - in Shanghai, for instance, they exceed US$200,000, while the average disposable income is only about US$4,000 a year - the trend also threatens to undermine the central government's social goal of affordable housing for the rising middle class.
In some cases, local governments - which earned more than US$230 billion from land auctions in 2009 - are also being accused of demolishing old neighbourhoods and unfairly compensating residents. In a recent poll conducted by China Youth Daily, a state-run newspaper, more than 80 per cent of the respondents said local governments were a 'major driving force' behind the skyrocketing property prices.
All of this is happening to the chagrin of private developers that dominated China's property market for more than a decade but are now feeling squeezed out of a game that favours developers with state-backed financing.
'It's a little like a son who borrows money from his mother,' said Yang Shaofeng, head of the Conworld Real Estate Agency in Beijing.
Last year, state banks made a record US$1.4 trillion in loans, nearly twice as much as the year before. Analysts now say they believe much of that money was diverted into the property market through off-balance-sheet manoeuvres, leading to the record land bids and soaring property prices.
That belief is adding to concerns that some of China's biggest state-owned banks may be sitting on enormous unreported debt.
Beijing is now struggling to rein in credit without slowing the nation's roaring economy. And regulators are trying to stop state banks from using clever manoeuvres to secretly lend money to overly aggressive state-owned developers.
Beijing also wants to restrain state companies that have little or no expertise in real estate. Last March, the State Assets Supervision and Administration Commission - one of the national government's most powerful bodies - ordered 78 state-owned companies to shed their real estate divisions.
But analysts say the government will have difficulty stopping hundreds of state-owned companies and their various subsidiaries from participating in what has become one of the country's hottest industries.
Experts say that more than 90 of the 125 state-owned companies directly under Beijing's control still have property divisions. And local and provincial governments control many additional developers.
The national government is grappling with a complex set of incentives that drive state-run companies to speculate in the property market with the aid of local governments. - NYT
Source: Business Times, 3 Aug 2010
Thursday, July 29, 2010
Shanghai's Peace Hotel opens after restoration
(SHANGHAI) The city's Peace Hotel, which once accommodated Charlie Chaplin and other celebrities, opened to guests yesterday after three years of restoration, the managers said in a statement.
Fairmont Peace Hotel will be managed by Chinese hotelier Shanghai Jin Jiang International Hotels (Group) Co and Fairmont Hotels & Resorts Inc, which runs the Savoy hotel in London.
Jin Jiang, which operates more than 600 hotels in China, spent HK$500 million (S$88 million) to restore the building.
Some of the main features of the hotel have been kept, including the lobby with an Octagon ceiling, the hoteliers said.
Rates start from 2,300 yuan (S$464) and go as high as more than 7,000 yuan for a night, the hotel's general manager, Kamal Naamani said at a press conference.
The hotel has 270 rooms including the so-called Nine Nations Suites.
The building, located on the Bund promenade overlooking the Huangpu River, has six restaurants and lounges, including the Jazz Bar patronised by former US Presidents Jimmy Carter and Ronald Reagan.
The Indian, English, Chinese and American suites have been preserved, while the French, Italian, Spanish, Japanese and German rooms were redesigned.
The hotel was previously called the Cathay Hotel and was built by British businessman Victor Sassoon, opening in 1929. The art deco property reopened as the Peace Hotel in 1956.
Jin Jiang also has an agreement with Swatch Group AG to develop the south wing of the old Peace Hotel, called Swatch Art Peace Hotel, part of which will serve as an arts centre. -- Bloomberg
Source: Business Times, 29 Jul 2010
Fairmont Peace Hotel will be managed by Chinese hotelier Shanghai Jin Jiang International Hotels (Group) Co and Fairmont Hotels & Resorts Inc, which runs the Savoy hotel in London.
Jin Jiang, which operates more than 600 hotels in China, spent HK$500 million (S$88 million) to restore the building.
Some of the main features of the hotel have been kept, including the lobby with an Octagon ceiling, the hoteliers said.
Rates start from 2,300 yuan (S$464) and go as high as more than 7,000 yuan for a night, the hotel's general manager, Kamal Naamani said at a press conference.
The hotel has 270 rooms including the so-called Nine Nations Suites.
The building, located on the Bund promenade overlooking the Huangpu River, has six restaurants and lounges, including the Jazz Bar patronised by former US Presidents Jimmy Carter and Ronald Reagan.
The Indian, English, Chinese and American suites have been preserved, while the French, Italian, Spanish, Japanese and German rooms were redesigned.
The hotel was previously called the Cathay Hotel and was built by British businessman Victor Sassoon, opening in 1929. The art deco property reopened as the Peace Hotel in 1956.
Jin Jiang also has an agreement with Swatch Group AG to develop the south wing of the old Peace Hotel, called Swatch Art Peace Hotel, part of which will serve as an arts centre. -- Bloomberg
Source: Business Times, 29 Jul 2010
Saturday, July 24, 2010
CapitaRetail China's net property income up 8.8%
SHOPPERS in China kept up their pace of spending and helped CapitaRetail China Trust (CRCT) deliver robust results in the second quarter.
The property trust saw net property income rise 8.8 per cent year-on-year to 97.2 million yuan (S$19.7 million) as revenue increased at its busy malls and property expenses decreased.
Distribution per unit was up 6.7 per cent at 2.07 cents from 1.94 cents a year ago, while distributable income rose 7.3 per cent to $12.9 million. Payouts will be distributed on Sept 24.
Gross revenue rose 3.7 per cent to 145.1 million yuan year-on-year, but fell 2.8 per cent in Singapore dollars because of the local currency's rise against the yuan in the three months to June 30 compared with a year ago.
Mr Victor Liew, chairman of CapitaRetail China Trust Management, said resilient domestic consumption is still driving growth in China, whose economy is expected to grow 10.5 per cent this year.
'We continue to benefit from the Chinese government's stimulus measures to boost domestic consumption and maintain stable and sustainable economic growth,' he said.
CRCT said tenant sales grew 28.8 per cent while shopper traffic was up 14.4 per cent over levels last year. Occupancy rates are at 96.1 per cent.
The trust's portfolio consisted of eight retail mall properties in five cities worth 5.8 billion yuan as of June 30.
Net asset value per unit as of June 30 was $1.13. CRCT's units closed up one cent at $1.26 yesterday.
Separately, Ascott Residence Trust reported a 4 per cent rise in distribution per unit to 1.87 cents in the second quarter from 1.79 cents a year ago.
Distributable income was up 5 per cent at $11.6 million while revenue rose 3 per cent to $44.4 million. Payouts will be made on Aug 27.
Ascott Residence Trust Management's chief executive, Mr Chong Kee Hiong, said the rise in revenue was led mainly by a better performance in China and Singapore arising from higher occupancies and rental rates.
'The level of business activities in Singapore has increased in line with the strong economic growth, resulting in higher demand for serviced residences,' he said.
Ascott Reit's portfolio has a total asset value of $1.59 billion, comprising 38 properties with 3,644 units in 11 cities across seven countries.
Net asset value per unit as of June 30 was $1.38. Ascott Reit's units closed down one cent at $1.23 yesterday.
Source: Straits Times, 24 Jul 2010
The property trust saw net property income rise 8.8 per cent year-on-year to 97.2 million yuan (S$19.7 million) as revenue increased at its busy malls and property expenses decreased.
Distribution per unit was up 6.7 per cent at 2.07 cents from 1.94 cents a year ago, while distributable income rose 7.3 per cent to $12.9 million. Payouts will be distributed on Sept 24.
Gross revenue rose 3.7 per cent to 145.1 million yuan year-on-year, but fell 2.8 per cent in Singapore dollars because of the local currency's rise against the yuan in the three months to June 30 compared with a year ago.
Mr Victor Liew, chairman of CapitaRetail China Trust Management, said resilient domestic consumption is still driving growth in China, whose economy is expected to grow 10.5 per cent this year.
'We continue to benefit from the Chinese government's stimulus measures to boost domestic consumption and maintain stable and sustainable economic growth,' he said.
CRCT said tenant sales grew 28.8 per cent while shopper traffic was up 14.4 per cent over levels last year. Occupancy rates are at 96.1 per cent.
The trust's portfolio consisted of eight retail mall properties in five cities worth 5.8 billion yuan as of June 30.
Net asset value per unit as of June 30 was $1.13. CRCT's units closed up one cent at $1.26 yesterday.
Separately, Ascott Residence Trust reported a 4 per cent rise in distribution per unit to 1.87 cents in the second quarter from 1.79 cents a year ago.
Distributable income was up 5 per cent at $11.6 million while revenue rose 3 per cent to $44.4 million. Payouts will be made on Aug 27.
Ascott Residence Trust Management's chief executive, Mr Chong Kee Hiong, said the rise in revenue was led mainly by a better performance in China and Singapore arising from higher occupancies and rental rates.
'The level of business activities in Singapore has increased in line with the strong economic growth, resulting in higher demand for serviced residences,' he said.
Ascott Reit's portfolio has a total asset value of $1.59 billion, comprising 38 properties with 3,644 units in 11 cities across seven countries.
Net asset value per unit as of June 30 was $1.38. Ascott Reit's units closed down one cent at $1.23 yesterday.
Source: Straits Times, 24 Jul 2010
Tuesday, July 20, 2010
Beijing flat prices rise to 22 times income levels: report
(BEIJING) A typical Beijing flat costs about 22 times average incomes in the city, state media said yesterday, highlighting the challenge China faces providing affordable housing amid a property boom.
A 90-square-metre apartment in Beijing cost 1.6 million yuan (S$325,331) last year, the China Daily said, citing an independent report. That compared to an average household disposable income of around 71,000 yuan in 2009, according to city figures. The report was completed by the Beijing University of Technology and the Social Science Academic Press.
It said the building of low-cost, government-subsidised housing had failed to meet demand and called on policy-makers to increase the supply of land for such projects.
Authorities in China have issued a slew of measures in recent months aimed at preventing the property market overheating and causing a bubble that could derail the world's third-largest economy. Chinese property prices in June fell 0.1 per cent from the previous month, their first monthly fall since the first quarter of 2009, according to official data. -- AFP
Source: Business Times, 20 Jul 2010
A 90-square-metre apartment in Beijing cost 1.6 million yuan (S$325,331) last year, the China Daily said, citing an independent report. That compared to an average household disposable income of around 71,000 yuan in 2009, according to city figures. The report was completed by the Beijing University of Technology and the Social Science Academic Press.
It said the building of low-cost, government-subsidised housing had failed to meet demand and called on policy-makers to increase the supply of land for such projects.
Authorities in China have issued a slew of measures in recent months aimed at preventing the property market overheating and causing a bubble that could derail the world's third-largest economy. Chinese property prices in June fell 0.1 per cent from the previous month, their first monthly fall since the first quarter of 2009, according to official data. -- AFP
Source: Business Times, 20 Jul 2010
Thursday, July 15, 2010
Beijing unlikely to reverse property tightening
Govt may fine-tune property policy as economy softens in the coming months
(BEIJING) Investors who bet that China will declare an early end to its property tightening campaign are doing so at their own peril.
While the government is likely to fine-tune property policy as the economy softens in the coming months, it is not about to reverse tightening measures that it believes are critical to safeguarding China's long-run growth prospects.
Property prices have only just started to dip. Falls should turn much steeper, with investment in the sector also taking a clear hit, before the government takes its foot off the brake.
'It is, of course, aware that declining prices and investment are the likely result,' said Xing Ziqiang, an economist with China International Capital Corp in Beijing.
'But so long the economy is doing all right, slowing gradually with no severe unemployment problem, the government should be able to tolerate this.'
That will disappoint those who thought they had already spied a U-turn in Chinese policy.
Earlier this week, Chinese property shares soared after a report that the government would relax a ban on mortgages for third homes.
This seemingly small change would have been explosive in its symbolism, implying that the government was flinching at the first signs of weakness in the property market.
With unusual alacrity, the banking regulator and the housing ministry published statements to deny the rumour.
'We don't see a loosening of policy in the near term because even though some cities have seen considerable price corrections, others haven't,' James Xia, vice-chairman of Chinese developer Evergrande Real Estate, said this week.
Nationwide, Chinese housing prices edged down 0.1 per cent last month from May, their first monthly fall since February 2009 - and the first real fruit of the tightening steps, which have included higher down payments and reduced lending to developers.
Notwithstanding the wishes of some investors, if China were to stand down now from its property tightening campaign, it could prove deeply disruptive to the economy's development.
Just last week, Kenneth Rogoff, a former chief economist at the International Monetary Fund, warned that the country's housing market was a bubble.
Fleshing out this view, Yi Xianrong, an economist at the Chinese Academy of Social Sciences, a government think tank, made the jaw-dropping claim that there are about 65.4 million empty apartments and houses in China's cities and towns, many of them bought up by people wagering on a constantly rising market.
Although Mr Yi's estimate, based on electricity meter readings, was met with scepticism, it still served to underscore how the government has a way to go to put the country's housing market on a more sustainable footing.
'We believe many analysts are underestimating China's determination in curbing property prices,' Ting Lu, an economist with Bank of America-Merrill Lynch, said in a note.
A little more than two years before the end of China's decade-long political cycle, the current crop of leaders would shudder at the prospect of a bubble inflating in the property sector and bursting just before they leave office, Mr Lu said.
Politics aside, the economic importance of getting it right is abundantly clear. The property sector makes up about 10 per cent of national output and a quarter of capital spending.
The government knows it has to walk a fine line. Its zealousness in curbing a previous property construction boom bore fruit just as the global financial crisis reached a crescendo in late 2008, driving the Chinese economy to a near halt.
'China will not issue more tightening measures,' said Yang Guohua, a property analyst with Oriental Securities. 'The overall tightening policy will still be implemented, but there may be some fine-tuning in the second half.'
Much will come down to how bank branches and local governments interpret rules.
After the banking regulator reiterated the ban on third-home mortgages, one commercial lender in Beijing told Reuters that such loans were absolutely forbidden. But a state bank in the booming port town of Ningbo said that a third-home mortgage could be arranged, provided the borrower's credit record was clean.
Still, investment in the property sector, running at 38 per cent over a year earlier, is sure to slow.
As that happens, the central government will spend more on public housing to pick up the slack and cushion the economy, said Sun Xuegong, a researcher in the National Development and Reform Commission, a powerful central planning agency. -- Reuters
Source: Business Times, 15 Jul 2010
(BEIJING) Investors who bet that China will declare an early end to its property tightening campaign are doing so at their own peril.
While the government is likely to fine-tune property policy as the economy softens in the coming months, it is not about to reverse tightening measures that it believes are critical to safeguarding China's long-run growth prospects.
Property prices have only just started to dip. Falls should turn much steeper, with investment in the sector also taking a clear hit, before the government takes its foot off the brake.
'It is, of course, aware that declining prices and investment are the likely result,' said Xing Ziqiang, an economist with China International Capital Corp in Beijing.
'But so long the economy is doing all right, slowing gradually with no severe unemployment problem, the government should be able to tolerate this.'
That will disappoint those who thought they had already spied a U-turn in Chinese policy.
Earlier this week, Chinese property shares soared after a report that the government would relax a ban on mortgages for third homes.
This seemingly small change would have been explosive in its symbolism, implying that the government was flinching at the first signs of weakness in the property market.
With unusual alacrity, the banking regulator and the housing ministry published statements to deny the rumour.
'We don't see a loosening of policy in the near term because even though some cities have seen considerable price corrections, others haven't,' James Xia, vice-chairman of Chinese developer Evergrande Real Estate, said this week.
Nationwide, Chinese housing prices edged down 0.1 per cent last month from May, their first monthly fall since February 2009 - and the first real fruit of the tightening steps, which have included higher down payments and reduced lending to developers.
Notwithstanding the wishes of some investors, if China were to stand down now from its property tightening campaign, it could prove deeply disruptive to the economy's development.
Just last week, Kenneth Rogoff, a former chief economist at the International Monetary Fund, warned that the country's housing market was a bubble.
Fleshing out this view, Yi Xianrong, an economist at the Chinese Academy of Social Sciences, a government think tank, made the jaw-dropping claim that there are about 65.4 million empty apartments and houses in China's cities and towns, many of them bought up by people wagering on a constantly rising market.
Although Mr Yi's estimate, based on electricity meter readings, was met with scepticism, it still served to underscore how the government has a way to go to put the country's housing market on a more sustainable footing.
'We believe many analysts are underestimating China's determination in curbing property prices,' Ting Lu, an economist with Bank of America-Merrill Lynch, said in a note.
A little more than two years before the end of China's decade-long political cycle, the current crop of leaders would shudder at the prospect of a bubble inflating in the property sector and bursting just before they leave office, Mr Lu said.
Politics aside, the economic importance of getting it right is abundantly clear. The property sector makes up about 10 per cent of national output and a quarter of capital spending.
The government knows it has to walk a fine line. Its zealousness in curbing a previous property construction boom bore fruit just as the global financial crisis reached a crescendo in late 2008, driving the Chinese economy to a near halt.
'China will not issue more tightening measures,' said Yang Guohua, a property analyst with Oriental Securities. 'The overall tightening policy will still be implemented, but there may be some fine-tuning in the second half.'
Much will come down to how bank branches and local governments interpret rules.
After the banking regulator reiterated the ban on third-home mortgages, one commercial lender in Beijing told Reuters that such loans were absolutely forbidden. But a state bank in the booming port town of Ningbo said that a third-home mortgage could be arranged, provided the borrower's credit record was clean.
Still, investment in the property sector, running at 38 per cent over a year earlier, is sure to slow.
As that happens, the central government will spend more on public housing to pick up the slack and cushion the economy, said Sun Xuegong, a researcher in the National Development and Reform Commission, a powerful central planning agency. -- Reuters
Source: Business Times, 15 Jul 2010
Beijing unlikely to reverse property tightening
Govt may fine-tune property policy as economy softens in the coming months
Investors who bet that China will declare an early end to its property tightening campaign are doing so at their own peril.
While the government is likely to fine-tune property policy as the economy softens in the coming months, it is not about to reverse tightening measures that it believes are critical to safeguarding China’s long-run growth prospects.
Property prices have only just started to dip. Falls should turn much steeper, with investment in the sector also taking a clear hit, before the government takes its foot off the brake.
‘It is, of course, aware that declining prices and investment are the likely result,’ said Xing Ziqiang, an economist with China International Capital Corp in Beijing.
‘But so long the economy is doing all right, slowing gradually with no severe unemployment problem, the government should be able to tolerate this.’
That will disappoint those who thought they had already spied a U-turn in Chinese policy.
Earlier this week, Chinese property shares soared after a report that the government would relax a ban on mortgages for third homes.
This seemingly small change would have been explosive in its symbolism, implying that the government was flinching at the first signs of weakness in the property market.
With unusual alacrity, the banking regulator and the housing ministry published statements to deny the rumour.
‘We don’t see a loosening of policy in the near term because even though some cities have seen considerable price corrections, others haven’t,’ James Xia, vice-chairman of Chinese developer Evergrande Real Estate, said this week.
Nationwide, Chinese housing prices edged down 0.1 per cent last month from May, their first monthly fall since February 2009 – and the first real fruit of the tightening steps, which have included higher down payments and reduced lending to developers.
Notwithstanding the wishes of some investors, if China were to stand down now from its property tightening campaign, it could prove deeply disruptive to the economy’s development.
Just last week, Kenneth Rogoff, a former chief economist at the International Monetary Fund, warned that the country’s housing market was a bubble.
Fleshing out this view, Yi Xianrong, an economist at the Chinese Academy of Social Sciences, a government think tank, made the jaw-dropping claim that there are about 65.4 million empty apartments and houses in China’s cities and towns, many of them bought up by people wagering on a constantly rising market.
Although Mr Yi’s estimate, based on electricity meter readings, was met with scepticism, it still served to underscore how the government has a way to go to put the country’s housing market on a more sustainable footing.
‘We believe many analysts are underestimating China’s determination in curbing property prices,’ Ting Lu, an economist with Bank of America-Merrill Lynch, said in a note.
A little more than two years before the end of China’s decade-long political cycle, the current crop of leaders would shudder at the prospect of a bubble inflating in the property sector and bursting just before they leave office, Mr Lu said.
Politics aside, the economic importance of getting it right is abundantly clear. The property sector makes up about 10 per cent of national output and a quarter of capital spending.
The government knows it has to walk a fine line. Its zealousness in curbing a previous property construction boom bore fruit just as the global financial crisis reached a crescendo in late 2008, driving the Chinese economy to a near halt.
‘China will not issue more tightening measures,’ said Yang Guohua, a property analyst with Oriental Securities. ‘The overall tightening policy will still be implemented, but there may be some fine-tuning in the second half.’
Much will come down to how bank branches and local governments interpret rules.
After the banking regulator reiterated the ban on third-home mortgages, one commercial lender in Beijing told Reuters that such loans were absolutely forbidden. But a state bank in the booming port town of Ningbo said that a third-home mortgage could be arranged, provided the borrower’s credit record was clean.
Still, investment in the property sector, running at 38 per cent over a year earlier, is sure to slow.
As that happens, the central government will spend more on public housing to pick up the slack and cushion the economy, said Sun Xuegong, a researcher in the National Development and Reform Commission, a powerful central planning agency.
Source: Reuters, 15 Jul 2010
Investors who bet that China will declare an early end to its property tightening campaign are doing so at their own peril.
While the government is likely to fine-tune property policy as the economy softens in the coming months, it is not about to reverse tightening measures that it believes are critical to safeguarding China’s long-run growth prospects.
Property prices have only just started to dip. Falls should turn much steeper, with investment in the sector also taking a clear hit, before the government takes its foot off the brake.
‘It is, of course, aware that declining prices and investment are the likely result,’ said Xing Ziqiang, an economist with China International Capital Corp in Beijing.
‘But so long the economy is doing all right, slowing gradually with no severe unemployment problem, the government should be able to tolerate this.’
That will disappoint those who thought they had already spied a U-turn in Chinese policy.
Earlier this week, Chinese property shares soared after a report that the government would relax a ban on mortgages for third homes.
This seemingly small change would have been explosive in its symbolism, implying that the government was flinching at the first signs of weakness in the property market.
With unusual alacrity, the banking regulator and the housing ministry published statements to deny the rumour.
‘We don’t see a loosening of policy in the near term because even though some cities have seen considerable price corrections, others haven’t,’ James Xia, vice-chairman of Chinese developer Evergrande Real Estate, said this week.
Nationwide, Chinese housing prices edged down 0.1 per cent last month from May, their first monthly fall since February 2009 – and the first real fruit of the tightening steps, which have included higher down payments and reduced lending to developers.
Notwithstanding the wishes of some investors, if China were to stand down now from its property tightening campaign, it could prove deeply disruptive to the economy’s development.
Just last week, Kenneth Rogoff, a former chief economist at the International Monetary Fund, warned that the country’s housing market was a bubble.
Fleshing out this view, Yi Xianrong, an economist at the Chinese Academy of Social Sciences, a government think tank, made the jaw-dropping claim that there are about 65.4 million empty apartments and houses in China’s cities and towns, many of them bought up by people wagering on a constantly rising market.
Although Mr Yi’s estimate, based on electricity meter readings, was met with scepticism, it still served to underscore how the government has a way to go to put the country’s housing market on a more sustainable footing.
‘We believe many analysts are underestimating China’s determination in curbing property prices,’ Ting Lu, an economist with Bank of America-Merrill Lynch, said in a note.
A little more than two years before the end of China’s decade-long political cycle, the current crop of leaders would shudder at the prospect of a bubble inflating in the property sector and bursting just before they leave office, Mr Lu said.
Politics aside, the economic importance of getting it right is abundantly clear. The property sector makes up about 10 per cent of national output and a quarter of capital spending.
The government knows it has to walk a fine line. Its zealousness in curbing a previous property construction boom bore fruit just as the global financial crisis reached a crescendo in late 2008, driving the Chinese economy to a near halt.
‘China will not issue more tightening measures,’ said Yang Guohua, a property analyst with Oriental Securities. ‘The overall tightening policy will still be implemented, but there may be some fine-tuning in the second half.’
Much will come down to how bank branches and local governments interpret rules.
After the banking regulator reiterated the ban on third-home mortgages, one commercial lender in Beijing told Reuters that such loans were absolutely forbidden. But a state bank in the booming port town of Ningbo said that a third-home mortgage could be arranged, provided the borrower’s credit record was clean.
Still, investment in the property sector, running at 38 per cent over a year earlier, is sure to slow.
As that happens, the central government will spend more on public housing to pick up the slack and cushion the economy, said Sun Xuegong, a researcher in the National Development and Reform Commission, a powerful central planning agency.
Source: Reuters, 15 Jul 2010
Wednesday, July 14, 2010
Buyer’s hunt for real estate discounts
For the first time in a year, Liu Long, 26, thinks he may consider purchasing an apartment in Beijing, despite the fact that the average price is still rising.
Liu seemed a little tired when he stepped into Kylin Zone, a property project near Beijing’s North Fourth Ring Road.
“This is the fifth real estate project I’ve seen this week,” Liu said.
“To be honest, in the past year, every time I read residential news, I frowned, because I hate to see the price continually rising.”
But he thinks the capital’s tightened property policies may offer a glimmer of hope for him, because property prices have stopped soaring since April and there are signs that prices might be starting to drop.
The Xi’an-born man graduated from Beijing Forestry University in 2008. His desire to own a property in Beijing is pressing because he would like to buy a house for his future wife before getting married.
From local media reports, Liu knew that around 75 property projects in Beijing had begun offering discounts recently; a rarity during the past 12 months.
At Kylin Zone, the project Liu was looking at was offering six discounted apartments as of the Dragon Boat Festival.
The previous average price of a property at Kylin Zone was 30,000 yuan per sq m, but the discounted properties were as low as 26,000 yuan per sq m.
Other projects such as the newly launched Seven Carat near Majiabao subway station and the popular Xifuhui International Community have all offered discounted apartments. The discounts vary from 1 to 10 percent.
Some developers are even waiving property management fees and providing refrigerators, air conditioners or furniture as extra gifts.
“Because the transaction volume in Beijing’s housing market has dropped to a record low for the past two years, the situation has prompted developers to take action to attract buyers,” said Carlby Xie, head of research & advisory in North China at Colliers International.
“In the following six months to 12 months, I expect a further 10 percent to 15 percent price drop in Beijing’s housing market,” Xie continued. “Though I don’t know whether the price will drop to early 2009 levels, I still regard now till the end of this year as a good buying time for house shoppers.”
The tough property policies have greatly influenced the market, Xie added.
At the beginning of this year, the central government and related authorities commenced a series of policies intended to rein in the rocketing property prices.
The controls include increasing the deposit for a second house and credit loan suspension for a third house.
In addition, local families are banned from buying more than one additional home, and non-locals are not allowed to buy an additional home unless they have worked in Beijing for a year.
From June 1 to June 19, only 1,398 non-subsidized residential properties were sold in Beijing, down 79.5 percent on the same period last year, according to statistics from Beijing Real Estate Transaction Management Website.
However, most developers in Beijing denied they have adopted a price drop strategy and insist their recent initiatives are merely normal marketing promotions.
Feng Chun, a real estate investment consultant at No 8 Party House, a high-end service apartment project in Beijing’s Chaoyang district, said some Chinese media had misunderstood the company’s preferential policy.
“They reported we would drop the price by almost 10,000 yuan per sq m, but actually we just pre-paid the investment return (6 percent) to our buyers when they purchase the apartments, and in the following five years, they don’t receive any money at all.”
Tian Wei, saleswoman at Kylin Zone, which has been called “the most favorable discounted project in Beijing” by local media, said her company was merely conducting a regular marketing move, not a price drop.
Officials from China Vanke Co’s Beijing branch, also revealed Vanke projects in Beijing are unlikely to experience a significant price drop.
“Different regions should adopt different strategies. Currently, in Beijing, we don’t see any necessity to lower our property prices directly,” said a woman surnamed Shi from Vanke’s public relations department.
Jin Yong, senior managing director of northern China at CB Richard Ellis, explained why real estate developers are cautious about dropping price.
“If they openly lower the price, they may face pressure from previous home buyers, because they paid more to buy a similar product,” Jin said.
“These concerns lead developers to adopt covert price-reductions such as offering discounts or sending furniture as gifts, instead of cutting the price directly.”
Jin predicted that in the following months, there is a good chance that property prices will fall further, but that it depends on many factors such as inflation and a possible property tax.
When Liu Long stepped out at Kylin Zone, he felt the price was still too high for him.
“The buying time may be coming, but I need to watch and wait for the best opportunity,” he said.
Tens of thousands of people in Beijing obviously share a similar view as they joined a “Chaodi Yubei Dui”, or Team Preparing for Bargains in June.
The team was organized online on June 1 by house.sina.com.cn, a leading property website in China. More than three million people supported the movement and around 200,000 people participated during the first three weeks of June.
“Half of our team members are from Beijing. We all believe that it may not be the best time to purchase a house in the capital now, but it’s time to get ready for it,” Yang Xi, editor-in-chief at house.sina.com.cn, told METRO.
“Most are young people who want to purchase their first property in Beijing. We select and supply them with information and organize visits to discounted projects. It may help them find a suitable property as quickly as possible,” Yang said.
Source: China Daily/Asia News Network, 14 Jul 2010
Liu seemed a little tired when he stepped into Kylin Zone, a property project near Beijing’s North Fourth Ring Road.
“This is the fifth real estate project I’ve seen this week,” Liu said.
“To be honest, in the past year, every time I read residential news, I frowned, because I hate to see the price continually rising.”
But he thinks the capital’s tightened property policies may offer a glimmer of hope for him, because property prices have stopped soaring since April and there are signs that prices might be starting to drop.
The Xi’an-born man graduated from Beijing Forestry University in 2008. His desire to own a property in Beijing is pressing because he would like to buy a house for his future wife before getting married.
From local media reports, Liu knew that around 75 property projects in Beijing had begun offering discounts recently; a rarity during the past 12 months.
At Kylin Zone, the project Liu was looking at was offering six discounted apartments as of the Dragon Boat Festival.
The previous average price of a property at Kylin Zone was 30,000 yuan per sq m, but the discounted properties were as low as 26,000 yuan per sq m.
Other projects such as the newly launched Seven Carat near Majiabao subway station and the popular Xifuhui International Community have all offered discounted apartments. The discounts vary from 1 to 10 percent.
Some developers are even waiving property management fees and providing refrigerators, air conditioners or furniture as extra gifts.
“Because the transaction volume in Beijing’s housing market has dropped to a record low for the past two years, the situation has prompted developers to take action to attract buyers,” said Carlby Xie, head of research & advisory in North China at Colliers International.
“In the following six months to 12 months, I expect a further 10 percent to 15 percent price drop in Beijing’s housing market,” Xie continued. “Though I don’t know whether the price will drop to early 2009 levels, I still regard now till the end of this year as a good buying time for house shoppers.”
The tough property policies have greatly influenced the market, Xie added.
At the beginning of this year, the central government and related authorities commenced a series of policies intended to rein in the rocketing property prices.
The controls include increasing the deposit for a second house and credit loan suspension for a third house.
In addition, local families are banned from buying more than one additional home, and non-locals are not allowed to buy an additional home unless they have worked in Beijing for a year.
From June 1 to June 19, only 1,398 non-subsidized residential properties were sold in Beijing, down 79.5 percent on the same period last year, according to statistics from Beijing Real Estate Transaction Management Website.
However, most developers in Beijing denied they have adopted a price drop strategy and insist their recent initiatives are merely normal marketing promotions.
Feng Chun, a real estate investment consultant at No 8 Party House, a high-end service apartment project in Beijing’s Chaoyang district, said some Chinese media had misunderstood the company’s preferential policy.
“They reported we would drop the price by almost 10,000 yuan per sq m, but actually we just pre-paid the investment return (6 percent) to our buyers when they purchase the apartments, and in the following five years, they don’t receive any money at all.”
Tian Wei, saleswoman at Kylin Zone, which has been called “the most favorable discounted project in Beijing” by local media, said her company was merely conducting a regular marketing move, not a price drop.
Officials from China Vanke Co’s Beijing branch, also revealed Vanke projects in Beijing are unlikely to experience a significant price drop.
“Different regions should adopt different strategies. Currently, in Beijing, we don’t see any necessity to lower our property prices directly,” said a woman surnamed Shi from Vanke’s public relations department.
Jin Yong, senior managing director of northern China at CB Richard Ellis, explained why real estate developers are cautious about dropping price.
“If they openly lower the price, they may face pressure from previous home buyers, because they paid more to buy a similar product,” Jin said.
“These concerns lead developers to adopt covert price-reductions such as offering discounts or sending furniture as gifts, instead of cutting the price directly.”
Jin predicted that in the following months, there is a good chance that property prices will fall further, but that it depends on many factors such as inflation and a possible property tax.
When Liu Long stepped out at Kylin Zone, he felt the price was still too high for him.
“The buying time may be coming, but I need to watch and wait for the best opportunity,” he said.
Tens of thousands of people in Beijing obviously share a similar view as they joined a “Chaodi Yubei Dui”, or Team Preparing for Bargains in June.
The team was organized online on June 1 by house.sina.com.cn, a leading property website in China. More than three million people supported the movement and around 200,000 people participated during the first three weeks of June.
“Half of our team members are from Beijing. We all believe that it may not be the best time to purchase a house in the capital now, but it’s time to get ready for it,” Yang Xi, editor-in-chief at house.sina.com.cn, told METRO.
“Most are young people who want to purchase their first property in Beijing. We select and supply them with information and organize visits to discounted projects. It may help them find a suitable property as quickly as possible,” Yang said.
Source: China Daily/Asia News Network, 14 Jul 2010
Tuesday, July 13, 2010
China property prices see first fall in 17 months
Some banks resume making mortgages on third homes
(BEIJING) Chinese property prices in June recorded their first monthly fall since February 2009, providing further evidence that a government drive to let the air out of an inflated market is working.
Average prices in 70 cities edged down 0.1 per cent from May, lowering the annual property inflation rate to 11.4 per cent in June from 12.4 per cent in the year to May and April's reading of 12.8 per cent, the National Bureau of Statistics said yesterday.
Coming on the heels of much slower import growth and a controlled moderation in bank lending, the figures reinforced the conviction of many economists that no further policy tightening is on the cards.
However, with surprisingly resilient exports offsetting softer domestic investment, the consensus is that Beijing will not be rushed into relaxing policy either until clearer signals emerge from the all-important property and construction sectors.
'Currently the Chinese property market's at a crossroads. It's a game of who blinks first,' said Dong Tao, chief China economist at Credit Suisse in Hong Kong.
The government, determined to squeeze out speculators, refuses to back down by reversing curbs imposed in April; developers don't want to waver because they paid high prices for land last year and have a bullish long-term outlook; and home buyers are sitting on the sidelines, Mr Tao said.
'One of these three key players needs to blink first and change their stance,' he said. 'I see policy in a pause mode. Whether that lasts till the end of the year is not entirely clear to me. It all depends on who blinks first.'
Engineering a soft landing in the housing market is critical. To prick a bubble that, by common consent, had developed in big cities such as Beijing and Shanghai, the government in April raised down payments, ended mortgage discounts, tightened rules on loans to developers and made it harder to buy multiple homes.
Although annual property inflation has subsequently fallen for two months in a row, underlying demand remains strong and few home buyers expect a sharp decline in prices, said Zhang Huadong, a property analyst with Xiangcai Securities in Shanghai.
'It's very unlikely that the government will relax its policy of curbing demand,' Mr Zhang said. 'If - and I mean if - policy were relaxed, there would be another surge in property prices. It would be a disaster for the market.'
The Securities Times reported yesterday that banks in major cities, including Shanghai and Shenzhen, had resumed making mortgages on third homes, in what the newspaper took as a sign that the government was easing its grip.
But Mr Tao with Credit Suisse and Liu Kun, a property analyst with Great Wall Securities in Shenzhen, said banks were just probing Beijing's determination to implement its curbs firmly. 'The government is unlikely to announce measures to adjust its previous policies until the first half of next year,' Mr Liu said.
Economists at Bank of America-Merrill Lynch agreed. 'Banks always like to test the resolve of policymakers. We are glad to see more people are coming around to our view that there will be no policy reversal and policy easing very soon on the property front,' they said in a note to clients.
Bringing prices down is a political imperative for the ruling Communist Party.
Buying an apartment in a big city is now beyond the reach of ordinary people, reminding them of the inequalities that blight China and thus posing a potential threat to the social harmony that is President Hu Jintao's ideological leitmotif.
Yet the government does not want to squeeze the life out of a sector that makes up 10 per cent of national output and 25 per cent of fixed asset investment and drives sales of everything from furnishing to electrical appliances and even cars. Construction also accounts for half of China's steel consumption.
To square the circle, the government is ramping up the construction of low-income housing, though many analysts doubt it can meet its ambitious targets. -- Reuters
Source: Business Times, 13 Jul 2010
(BEIJING) Chinese property prices in June recorded their first monthly fall since February 2009, providing further evidence that a government drive to let the air out of an inflated market is working.
Average prices in 70 cities edged down 0.1 per cent from May, lowering the annual property inflation rate to 11.4 per cent in June from 12.4 per cent in the year to May and April's reading of 12.8 per cent, the National Bureau of Statistics said yesterday.
Coming on the heels of much slower import growth and a controlled moderation in bank lending, the figures reinforced the conviction of many economists that no further policy tightening is on the cards.
However, with surprisingly resilient exports offsetting softer domestic investment, the consensus is that Beijing will not be rushed into relaxing policy either until clearer signals emerge from the all-important property and construction sectors.
'Currently the Chinese property market's at a crossroads. It's a game of who blinks first,' said Dong Tao, chief China economist at Credit Suisse in Hong Kong.
The government, determined to squeeze out speculators, refuses to back down by reversing curbs imposed in April; developers don't want to waver because they paid high prices for land last year and have a bullish long-term outlook; and home buyers are sitting on the sidelines, Mr Tao said.
'One of these three key players needs to blink first and change their stance,' he said. 'I see policy in a pause mode. Whether that lasts till the end of the year is not entirely clear to me. It all depends on who blinks first.'
Engineering a soft landing in the housing market is critical. To prick a bubble that, by common consent, had developed in big cities such as Beijing and Shanghai, the government in April raised down payments, ended mortgage discounts, tightened rules on loans to developers and made it harder to buy multiple homes.
Although annual property inflation has subsequently fallen for two months in a row, underlying demand remains strong and few home buyers expect a sharp decline in prices, said Zhang Huadong, a property analyst with Xiangcai Securities in Shanghai.
'It's very unlikely that the government will relax its policy of curbing demand,' Mr Zhang said. 'If - and I mean if - policy were relaxed, there would be another surge in property prices. It would be a disaster for the market.'
The Securities Times reported yesterday that banks in major cities, including Shanghai and Shenzhen, had resumed making mortgages on third homes, in what the newspaper took as a sign that the government was easing its grip.
But Mr Tao with Credit Suisse and Liu Kun, a property analyst with Great Wall Securities in Shenzhen, said banks were just probing Beijing's determination to implement its curbs firmly. 'The government is unlikely to announce measures to adjust its previous policies until the first half of next year,' Mr Liu said.
Economists at Bank of America-Merrill Lynch agreed. 'Banks always like to test the resolve of policymakers. We are glad to see more people are coming around to our view that there will be no policy reversal and policy easing very soon on the property front,' they said in a note to clients.
Bringing prices down is a political imperative for the ruling Communist Party.
Buying an apartment in a big city is now beyond the reach of ordinary people, reminding them of the inequalities that blight China and thus posing a potential threat to the social harmony that is President Hu Jintao's ideological leitmotif.
Yet the government does not want to squeeze the life out of a sector that makes up 10 per cent of national output and 25 per cent of fixed asset investment and drives sales of everything from furnishing to electrical appliances and even cars. Construction also accounts for half of China's steel consumption.
To square the circle, the government is ramping up the construction of low-income housing, though many analysts doubt it can meet its ambitious targets. -- Reuters
Source: Business Times, 13 Jul 2010
China property prices fall due to govt curbs
BEIJING: Chinese property prices last month recorded their first monthly fall since February last year, providing further evidence that a government drive to let the air out of an inflated market is working.
Average prices in 70 cities edged down 0.1 per cent from May, lowering the annual property inflation rate to 11.4 per cent last month, from 12.4 per cent in the year to May and April's reading of 12.8 per cent, the National Bureau of Statistics said yesterday.
Coming on the heels of much slower import growth and a controlled moderation in bank lending, the figures reinforced the conviction of many economists that no further policy tightening is on the cards.
However, with surprisingly resilient exports offsetting softer domestic investment, the consensus is that Beijing will not be rushed into relaxing policy until clearer signals emerge from the all-important property and construction sectors.
The government, determined to squeeze out speculators, refuses to back down by reversing curbs imposed in April; developers do not want to waver because they paid high prices for land last year and have a bullish long-term outlook; and home buyers are sitting on the sidelines, said Mr Dong Tao, chief China economist at Credit Suisse in Hong Kong
Engineering a soft landing in the housing market is critical. To prick a bubble that had developed in big cities such as Beijing and Shanghai, the government in April raised down-payments, ended mortgage discounts, tightened rules on loans to developers and made it harder to buy multiple homes.
Although annual property inflation has fallen for two months in a row, underlying demand remains strong and few home buyers expect a sharp decline in prices, said Mr Zhang Huadong, a property analyst with Xiangcai Securities in Shanghai.
'It's very unlikely that the government will relax its policy of curbing demand,' he said. 'If policy were relaxed, there would be another surge in property prices. It would be a disaster for the market.'
REUTERS
Source: Straits Times, 13 Jul 2010
Average prices in 70 cities edged down 0.1 per cent from May, lowering the annual property inflation rate to 11.4 per cent last month, from 12.4 per cent in the year to May and April's reading of 12.8 per cent, the National Bureau of Statistics said yesterday.
Coming on the heels of much slower import growth and a controlled moderation in bank lending, the figures reinforced the conviction of many economists that no further policy tightening is on the cards.
However, with surprisingly resilient exports offsetting softer domestic investment, the consensus is that Beijing will not be rushed into relaxing policy until clearer signals emerge from the all-important property and construction sectors.
The government, determined to squeeze out speculators, refuses to back down by reversing curbs imposed in April; developers do not want to waver because they paid high prices for land last year and have a bullish long-term outlook; and home buyers are sitting on the sidelines, said Mr Dong Tao, chief China economist at Credit Suisse in Hong Kong
Engineering a soft landing in the housing market is critical. To prick a bubble that had developed in big cities such as Beijing and Shanghai, the government in April raised down-payments, ended mortgage discounts, tightened rules on loans to developers and made it harder to buy multiple homes.
Although annual property inflation has fallen for two months in a row, underlying demand remains strong and few home buyers expect a sharp decline in prices, said Mr Zhang Huadong, a property analyst with Xiangcai Securities in Shanghai.
'It's very unlikely that the government will relax its policy of curbing demand,' he said. 'If policy were relaxed, there would be another surge in property prices. It would be a disaster for the market.'
REUTERS
Source: Straits Times, 13 Jul 2010
Monday, July 12, 2010
The housing bubble dilemma
It has produced a series of undesirable economic, social and even political consequences
DURING the last decade, China's housing bubble has been a serious concern. The average house price in big cities like Shanghai and Beijing is now over 25,000 yuan (S$5,100) per square metre (by comparison, the resale price of HDB flats is around 15,000 yuan per square metre). Ten years ago, it was only around 5,000 yuan.
In what was an unexpected but nationwide trend, there was a quick recovery of the housing market in China after the world economic crisis in 2008. The crisis had only caused China's housing market to stagnate for half a year. In the previous 10 years, China had barely experienced any downturn in its housing market.
How was it that the housing bubble in China could last for so long? A simple explanation is market disequilibrium caused by the quick expansion of demand but limited land supply. The main factors behind the high housing demand in urban China are clear. They include rapid urbanisation over the past decade which resulted in about 200 million people moving from the rural areas to the cities; fast economic growth, which has given rise to a growing class of suddenly-rich households with strong purchasing power; and the idle capital which entered the property market - both as a store of value and for speculation due to the scarcity of other investment opportunities.
The restricted land supply, on the other hand, is simply due to the government's land supply control and China's land laws.
In view of the housing bubble, the central government has tried repeatedly to use policies to curb housing price increases. It has restricted land use for low density buildings and independent house construction. It has also restricted housing loans, as well as foreign home purchases. Unfortunately, all these policies have failed. Increasing land supply seems to be the last measure in the government's attempts to moderate the market pressure.
But supplying more land for urban development affects China's other long term national objective - protection of arable land for food security. China now faces a dilemma of whether to loosen the restrictions on land supply and forego food security or live with the housing bubble but maintain food security. Both are unappealing options.
Alongside the sizzling housing market, a series of undesirable economic, social and even political consequences are becoming evident. The society is bewildered and angered by frequent instances of corruption, huge profits of property developers, and the violence sometimes associated with land acquisition, among other issues.
The immediate economic impact of the housing bubble is the deterioration of housing affordability for low-income citizens. Official figures in China reveal that the average housing price in big cities is around eight times the average annual household income, which is much higher than the international standard of five times. In the top few big cities, the actual situation is even worse than the average. The big gap between high housing prices and low purchasing power of the majority of people has resulted in a very strange phenomenon in China, in which the vacancy rate of new housing has remained at a very high level of around 20 per cent.
In September 2008, I visited a suburb in Tianjin City, the Baodi District, where one of the largest property projects in China, comprising 8,000 independent houses, is located. Most of the completed houses were vacant. They were either purchased but not occupied, or not sold. Such developments reflect a huge waste of resources.
Why do housing prices not go down with such high vacancy rates? Part of the answer lies in the abnormally high profits of land developers in China due to their monopoly power over the limited land supply. Developers have become an obvious target among people who allege that China's wealth distribution mechanism is unfair.
How high are developers' profits? When I visited Nanjing city in January 2009 and asked one of my former students who was a CEO of a land development firm about the profit margin, his response was that even if prices were to fall by 50 per cent, his company's profit could still be maintained. This may not be true of all developers, but it does support the common belief.
Given high demand and limited land supply, the profits of developers are simply determined by the land cost. The land supply in China is, however, controlled by the government. Local governments are the only authorised direct land suppliers for urban development.
In the early years, many developers got land at low cost from local governments. Indeed, most of the biggest corruption scandals in China were related to local government land supplies. Only in recent years has strict open-bidding systems resulted in higher land prices for developers. However, even with the high land cost, developers can still partially enjoy monopoly power as housing demand expands faster.
Also, while urban municipal governments in China have the right to acquire land from villagers for urban development with central government approval, rural farmers do not have the right to sell their land, even when they are the owners. This is partly why land acquisition disputes have become one of the most high-profile social issues in China.
As a result of paying low compensation to farmers for land and charging high prices to developers, local governments have been able to use land as a significant source of capital. It is said that land profits could account for as much as two thirds of many local governments' revenue. Local governments have also relied on the housing construction as a rapid means to spur the development of other industries, especially after the crisis.
In dealing with all the complaints related to China's long-drawn housing bubble, the Chinese government must balance food security considerations, implications of the distorted housing market with economic growth imperatives. Trade-offs must be made, but change can only happen at a gradual pace. Some moderation of housing market pressure can be expected via increased land supply, the removal of incentives for speculation and provision of subsidised housing for low-income citizens. But achieving this goal could take five to ten years.
The writer is Associate Professor at the Department of Economics, Nanyang Technological University
Source: Business Times, 12 Jul 2010
DURING the last decade, China's housing bubble has been a serious concern. The average house price in big cities like Shanghai and Beijing is now over 25,000 yuan (S$5,100) per square metre (by comparison, the resale price of HDB flats is around 15,000 yuan per square metre). Ten years ago, it was only around 5,000 yuan.
In what was an unexpected but nationwide trend, there was a quick recovery of the housing market in China after the world economic crisis in 2008. The crisis had only caused China's housing market to stagnate for half a year. In the previous 10 years, China had barely experienced any downturn in its housing market.
How was it that the housing bubble in China could last for so long? A simple explanation is market disequilibrium caused by the quick expansion of demand but limited land supply. The main factors behind the high housing demand in urban China are clear. They include rapid urbanisation over the past decade which resulted in about 200 million people moving from the rural areas to the cities; fast economic growth, which has given rise to a growing class of suddenly-rich households with strong purchasing power; and the idle capital which entered the property market - both as a store of value and for speculation due to the scarcity of other investment opportunities.
The restricted land supply, on the other hand, is simply due to the government's land supply control and China's land laws.
In view of the housing bubble, the central government has tried repeatedly to use policies to curb housing price increases. It has restricted land use for low density buildings and independent house construction. It has also restricted housing loans, as well as foreign home purchases. Unfortunately, all these policies have failed. Increasing land supply seems to be the last measure in the government's attempts to moderate the market pressure.
But supplying more land for urban development affects China's other long term national objective - protection of arable land for food security. China now faces a dilemma of whether to loosen the restrictions on land supply and forego food security or live with the housing bubble but maintain food security. Both are unappealing options.
Alongside the sizzling housing market, a series of undesirable economic, social and even political consequences are becoming evident. The society is bewildered and angered by frequent instances of corruption, huge profits of property developers, and the violence sometimes associated with land acquisition, among other issues.
The immediate economic impact of the housing bubble is the deterioration of housing affordability for low-income citizens. Official figures in China reveal that the average housing price in big cities is around eight times the average annual household income, which is much higher than the international standard of five times. In the top few big cities, the actual situation is even worse than the average. The big gap between high housing prices and low purchasing power of the majority of people has resulted in a very strange phenomenon in China, in which the vacancy rate of new housing has remained at a very high level of around 20 per cent.
In September 2008, I visited a suburb in Tianjin City, the Baodi District, where one of the largest property projects in China, comprising 8,000 independent houses, is located. Most of the completed houses were vacant. They were either purchased but not occupied, or not sold. Such developments reflect a huge waste of resources.
Why do housing prices not go down with such high vacancy rates? Part of the answer lies in the abnormally high profits of land developers in China due to their monopoly power over the limited land supply. Developers have become an obvious target among people who allege that China's wealth distribution mechanism is unfair.
How high are developers' profits? When I visited Nanjing city in January 2009 and asked one of my former students who was a CEO of a land development firm about the profit margin, his response was that even if prices were to fall by 50 per cent, his company's profit could still be maintained. This may not be true of all developers, but it does support the common belief.
Given high demand and limited land supply, the profits of developers are simply determined by the land cost. The land supply in China is, however, controlled by the government. Local governments are the only authorised direct land suppliers for urban development.
In the early years, many developers got land at low cost from local governments. Indeed, most of the biggest corruption scandals in China were related to local government land supplies. Only in recent years has strict open-bidding systems resulted in higher land prices for developers. However, even with the high land cost, developers can still partially enjoy monopoly power as housing demand expands faster.
Also, while urban municipal governments in China have the right to acquire land from villagers for urban development with central government approval, rural farmers do not have the right to sell their land, even when they are the owners. This is partly why land acquisition disputes have become one of the most high-profile social issues in China.
As a result of paying low compensation to farmers for land and charging high prices to developers, local governments have been able to use land as a significant source of capital. It is said that land profits could account for as much as two thirds of many local governments' revenue. Local governments have also relied on the housing construction as a rapid means to spur the development of other industries, especially after the crisis.
In dealing with all the complaints related to China's long-drawn housing bubble, the Chinese government must balance food security considerations, implications of the distorted housing market with economic growth imperatives. Trade-offs must be made, but change can only happen at a gradual pace. Some moderation of housing market pressure can be expected via increased land supply, the removal of incentives for speculation and provision of subsidised housing for low-income citizens. But achieving this goal could take five to ten years.
The writer is Associate Professor at the Department of Economics, Nanyang Technological University
Source: Business Times, 12 Jul 2010
No stronger property market in the world than China
AS soon as Jamie Dimon, CEO and chairman of JPMorgan Chase, sat next to me at Beijing's Grand Hyatt Hotel after delivering his keynote address at an investment conference, he popped an abrupt question to me: 'So, are you worried about the Chinese government's recent measures to manage the property bubble?'
Somewhat to his surprise, I replied: 'I would be worried if the government doesn't do anything about it.' To clarify, I added: 'We are a long-term player in China. We have been here for 15 years, and have seen several cycles including the painful Asian crisis. We prefer a more orderly and stable property market instead of an excessively speculative one.'
I then asked him: 'Is there a stronger property market in the world than China?' He thought for a short moment and said: 'No.'
As one of the most well-known Wall Street bankers in the world today, Jamie Dimon is not alone in his concern about China's property boom. Many alarm bells have been raised previously, the most stirring being the remark by James Chanos, a hedge fund short-selling expert who proclaimed early this year that the property boom in China looked like 'Dubai times 1000 - or worse'.
Jim Rogers, a well-known international investor, rebutted that Mr Chanos' remarks showed 'a lack of understanding about Dubai and China. Dubai's economy is built on real estate speculation, whereas China's is not. It is just part of the Chinese economy'.
So what is our view then? How do the recently introduced measures affect CapitaLand?
Unstoppable growth
China is a huge country with the world's largest population. It is a continent economy with 1.3 billion people, and had not too long ago embraced a 'market' economy. Over the last 30 years, it has grown 'miraculously' at an average of 10 per cent per annum. It is now the largest manufacturer and exporter in the world and enjoys huge trade surpluses.
It has prudently built up the world's largest foreign exchange reserves of US$2.4 trillion. With a GDP per capita of US$3,687 in 2009, up from about US$100 in 1965, the country has progressed exponentially. In every sense, its growth seems unstoppable.
Urbanisation & housing demands
With such growth, China is experiencing the largest urbanisation in human history. Currently, the urbanisation level in China is still relatively low at 46.6 per cent which was Japan's in 1965. Between 1990 and 2030, China's urban population is forecast to increase by 560 million, more than 100 million larger than the combined population of the United States (309 million) and Japan (128 million). Given such rapid urbanisation, China will easily need 10 to 15 million new homes every year.
The China Economic Information Network estimates that with such urbanisation, the number of cities in China will increase from the current 660 to beyond 1,000 by 2014. This has resulted in the property sector playing catch-up to meet the housing needs required in China's cities. It did not help that more than 20 years ago, the government halted its subsidised public housing programme to let the private sector take over the massive housing needs of the country. The physical demand for homes is growing acutely without adequate supply, particularly for the non high-end housing sector.
Is there a housing bubble?
The answer is not so straightforward.
First, it is important to understand that China is not one big homogeneous market. Home prices vary from first to third-tier cities and for different spectrum of homes. For example, a mid-end apartment in Shanghai can cost five times more than a similar one in Zhengzhou, the capital of Henan province. Even in Shanghai, where every affluent Chinese in the country aspires to own an apartment, there is a huge price discrepancy between different tiers of apartments. High-end apartments may cost up to five or seven times a mid-tier apartment. The market is very segmented.
Next, we must look at affordability for the average Chinese. A practical measure is the affordability ratio, defined as the mortgage debt payable per month over monthly household income. Banks will not lend if the buyer's affordability ratio exceeds 50 per cent. Surveys show that now, the average affordability ratio is around 40 per cent for 70 major cities. This is similar to Singapore.
For the key gateway cities, namely Beijing, Shanghai, Guangzhou and Shenzhen, the ratios have exceeded 50 per cent. But only about 50 per cent of homebuyers will take up a mortgage. Also, statistics have shown that only 20 per cent of buyers are 'bubble building' investors or speculators. My conclusion is that there is a property bubble building up but it is limited to the four gateway cities. The same cannot be said of the other cities, or when considering the mid-end market.
China's experience of rising property prices is quite unlike those experienced in the US and other developed countries. In China, household income growth today still outpaces its house price growth. This was not so for US, UK and Japan before their property prices crashed.
Between 2004 and 2009, cumulative property prices growth in China rose by 72 per cent, while cumulative household income growth increased by 82 per cent. Contrast this with the household income growth against house prices from 1995 to 2007 for the US and UK respectively (48 per cent vs 114 per cent and 36 per cent vs 220 per cent) and for Japan between 1976 and 1990 (126 per cent vs 190 per cent).
As long as demand for housing remains unmet and household income continues to grow faster than home prices, property prices will continue to escalate.
The Chinese government has intervened with rapid cooling measures such as restricting apartment sizes to 90 sq m, curbing speculation by raising deposits to as much as 50 per cent for second-home buyers and restricting lending for third-home buyers, banning non-resident foreign buyers, restricting bank lending capacity, and aggressively supplying more land for 'economical' housing. The government further demonstrated their seriousness here by only allowing 16 out of 94 of their major state owned enterprises to continue with their non-core property business.
Will there be a subprime crisis?
Unlike other developed countries, China's housing mortgages constitute 12.5 per cent of the total financial institution RMB loans, whilst RMB loans to real estate developers constitute only 6.7 per cent of their entire RMB loan portfolio. The total exposure to the property sector is therefore less than 20 per cent of the total financial intended RMB loan. Another comforting view is that China's outstanding mortgage constitutes 14.3 per cent of her GDP, whilst the Eurozone figure is at 40 per cent and US at 97 per cent. As loans are limited to 70 per cent of the value of the property, its capital value will have to drop substantially before negative equity hurts the buyers.
On this basis, Chinese buyers with large household savings will be able to hold their properties unless prices drop drastically. Even if this happens, on the strength of the Chinese economy, the impact on China will not be as grave as what the US has experienced. I should add that because of the loan to value mortgage lending limits and the credit checks by banks in China, a sub-prime problem like the one in US is not a likelihood.
The rail project
An analysis of China's future would not be complete without mentioning China's ambitions to connect the country with a high speed railway (HSR) network. China already has 6,500 km of these HSR lines, effectively shrinking the entire country to 80 per cent of its original size by travel time (excluding Tibet, Xinjiang, Qinghai and the Inner Mongolia region, which account for only 5 per cent of China's population).
By 2012, there will be 13,488 km HSR network (shrinking China to 50 per cent of original size), and 28,538 km by 2014. Overall, it is estimated that the HSR will finally shrink China to 9 per cent of her original size in terms of travelling time! With this increased accessibility as part of China's overall economic development, it is believed that urbanisation and the property market will go through another enhanced phase of dramatic economic transformation.
When Dr Sun Yat Sen founded New China a century ago, he envisioned a railway network to bring economic wealth to the country, just as the railway network started the transformation of 19th century America into the world's largest economy. Now China is actively putting that strategy into reality.
Price potential
There is still immense opportunity for CapitaLand to grow in China, especially in the mid-tier property market. As at 1Q 2010, prices in Singapore's mid-end homes are 2.2 times that of Shanghai, and 2.5 times of Beijing.
When compared with Hong Kong prices, the corresponding multiples are 3.6 times and 4 times respectively. Since Beijing and Shanghai have a much larger population and with higher growth rate, the potential for growth is much greater than Singapore's or Hong Kong's.
How much longer do you think it will take for them to catch up with us on housing capital values? My guess is five to seven years! In fact, prices of some luxury apartments in Shanghai are already on par with those in Singapore.
Affordability
Looking ahead, a new segment with tremendous potential is affordable housing. Building affordable housing will somewhat ease the escalating prices that delay home ownership for middle income families. With smaller, affordable properties as their first homes, they can scale up to larger, higher-priced homes as household income increases.
CapitaLand will be looking to build affordable housing in any city where there is demand. Acquiring land at reasonable prices is very important and we will need the support of local government and local partners to source for housing sites at the right price.
Conclusion
China's rapid economic expansion is unstoppable. CapitaLand has been successful in China for the past 16 years. We have the experience, track record, reputation, capabilities and capacity to participate in the growth of China's real estate market. With all the new government controls, the property market will be harder to deal with. And local Chinese developers are getting more competitive.
But the market is immense there. To answer Jamie Dimon, we are more confident that CapitaLand will benefit from the Chinese government's measure to render stability to the property market.
To us, there is no stronger market in the world than China.
The writer is president & CEO, CapitaLand Group
Source: Business Times, 12 Jul 2010
Somewhat to his surprise, I replied: 'I would be worried if the government doesn't do anything about it.' To clarify, I added: 'We are a long-term player in China. We have been here for 15 years, and have seen several cycles including the painful Asian crisis. We prefer a more orderly and stable property market instead of an excessively speculative one.'
I then asked him: 'Is there a stronger property market in the world than China?' He thought for a short moment and said: 'No.'
As one of the most well-known Wall Street bankers in the world today, Jamie Dimon is not alone in his concern about China's property boom. Many alarm bells have been raised previously, the most stirring being the remark by James Chanos, a hedge fund short-selling expert who proclaimed early this year that the property boom in China looked like 'Dubai times 1000 - or worse'.
Jim Rogers, a well-known international investor, rebutted that Mr Chanos' remarks showed 'a lack of understanding about Dubai and China. Dubai's economy is built on real estate speculation, whereas China's is not. It is just part of the Chinese economy'.
So what is our view then? How do the recently introduced measures affect CapitaLand?
Unstoppable growth
China is a huge country with the world's largest population. It is a continent economy with 1.3 billion people, and had not too long ago embraced a 'market' economy. Over the last 30 years, it has grown 'miraculously' at an average of 10 per cent per annum. It is now the largest manufacturer and exporter in the world and enjoys huge trade surpluses.
It has prudently built up the world's largest foreign exchange reserves of US$2.4 trillion. With a GDP per capita of US$3,687 in 2009, up from about US$100 in 1965, the country has progressed exponentially. In every sense, its growth seems unstoppable.
Urbanisation & housing demands
With such growth, China is experiencing the largest urbanisation in human history. Currently, the urbanisation level in China is still relatively low at 46.6 per cent which was Japan's in 1965. Between 1990 and 2030, China's urban population is forecast to increase by 560 million, more than 100 million larger than the combined population of the United States (309 million) and Japan (128 million). Given such rapid urbanisation, China will easily need 10 to 15 million new homes every year.
The China Economic Information Network estimates that with such urbanisation, the number of cities in China will increase from the current 660 to beyond 1,000 by 2014. This has resulted in the property sector playing catch-up to meet the housing needs required in China's cities. It did not help that more than 20 years ago, the government halted its subsidised public housing programme to let the private sector take over the massive housing needs of the country. The physical demand for homes is growing acutely without adequate supply, particularly for the non high-end housing sector.
Is there a housing bubble?
The answer is not so straightforward.
First, it is important to understand that China is not one big homogeneous market. Home prices vary from first to third-tier cities and for different spectrum of homes. For example, a mid-end apartment in Shanghai can cost five times more than a similar one in Zhengzhou, the capital of Henan province. Even in Shanghai, where every affluent Chinese in the country aspires to own an apartment, there is a huge price discrepancy between different tiers of apartments. High-end apartments may cost up to five or seven times a mid-tier apartment. The market is very segmented.
Next, we must look at affordability for the average Chinese. A practical measure is the affordability ratio, defined as the mortgage debt payable per month over monthly household income. Banks will not lend if the buyer's affordability ratio exceeds 50 per cent. Surveys show that now, the average affordability ratio is around 40 per cent for 70 major cities. This is similar to Singapore.
For the key gateway cities, namely Beijing, Shanghai, Guangzhou and Shenzhen, the ratios have exceeded 50 per cent. But only about 50 per cent of homebuyers will take up a mortgage. Also, statistics have shown that only 20 per cent of buyers are 'bubble building' investors or speculators. My conclusion is that there is a property bubble building up but it is limited to the four gateway cities. The same cannot be said of the other cities, or when considering the mid-end market.
China's experience of rising property prices is quite unlike those experienced in the US and other developed countries. In China, household income growth today still outpaces its house price growth. This was not so for US, UK and Japan before their property prices crashed.
Between 2004 and 2009, cumulative property prices growth in China rose by 72 per cent, while cumulative household income growth increased by 82 per cent. Contrast this with the household income growth against house prices from 1995 to 2007 for the US and UK respectively (48 per cent vs 114 per cent and 36 per cent vs 220 per cent) and for Japan between 1976 and 1990 (126 per cent vs 190 per cent).
As long as demand for housing remains unmet and household income continues to grow faster than home prices, property prices will continue to escalate.
The Chinese government has intervened with rapid cooling measures such as restricting apartment sizes to 90 sq m, curbing speculation by raising deposits to as much as 50 per cent for second-home buyers and restricting lending for third-home buyers, banning non-resident foreign buyers, restricting bank lending capacity, and aggressively supplying more land for 'economical' housing. The government further demonstrated their seriousness here by only allowing 16 out of 94 of their major state owned enterprises to continue with their non-core property business.
Will there be a subprime crisis?
Unlike other developed countries, China's housing mortgages constitute 12.5 per cent of the total financial institution RMB loans, whilst RMB loans to real estate developers constitute only 6.7 per cent of their entire RMB loan portfolio. The total exposure to the property sector is therefore less than 20 per cent of the total financial intended RMB loan. Another comforting view is that China's outstanding mortgage constitutes 14.3 per cent of her GDP, whilst the Eurozone figure is at 40 per cent and US at 97 per cent. As loans are limited to 70 per cent of the value of the property, its capital value will have to drop substantially before negative equity hurts the buyers.
On this basis, Chinese buyers with large household savings will be able to hold their properties unless prices drop drastically. Even if this happens, on the strength of the Chinese economy, the impact on China will not be as grave as what the US has experienced. I should add that because of the loan to value mortgage lending limits and the credit checks by banks in China, a sub-prime problem like the one in US is not a likelihood.
The rail project
An analysis of China's future would not be complete without mentioning China's ambitions to connect the country with a high speed railway (HSR) network. China already has 6,500 km of these HSR lines, effectively shrinking the entire country to 80 per cent of its original size by travel time (excluding Tibet, Xinjiang, Qinghai and the Inner Mongolia region, which account for only 5 per cent of China's population).
By 2012, there will be 13,488 km HSR network (shrinking China to 50 per cent of original size), and 28,538 km by 2014. Overall, it is estimated that the HSR will finally shrink China to 9 per cent of her original size in terms of travelling time! With this increased accessibility as part of China's overall economic development, it is believed that urbanisation and the property market will go through another enhanced phase of dramatic economic transformation.
When Dr Sun Yat Sen founded New China a century ago, he envisioned a railway network to bring economic wealth to the country, just as the railway network started the transformation of 19th century America into the world's largest economy. Now China is actively putting that strategy into reality.
Price potential
There is still immense opportunity for CapitaLand to grow in China, especially in the mid-tier property market. As at 1Q 2010, prices in Singapore's mid-end homes are 2.2 times that of Shanghai, and 2.5 times of Beijing.
When compared with Hong Kong prices, the corresponding multiples are 3.6 times and 4 times respectively. Since Beijing and Shanghai have a much larger population and with higher growth rate, the potential for growth is much greater than Singapore's or Hong Kong's.
How much longer do you think it will take for them to catch up with us on housing capital values? My guess is five to seven years! In fact, prices of some luxury apartments in Shanghai are already on par with those in Singapore.
Affordability
Looking ahead, a new segment with tremendous potential is affordable housing. Building affordable housing will somewhat ease the escalating prices that delay home ownership for middle income families. With smaller, affordable properties as their first homes, they can scale up to larger, higher-priced homes as household income increases.
CapitaLand will be looking to build affordable housing in any city where there is demand. Acquiring land at reasonable prices is very important and we will need the support of local government and local partners to source for housing sites at the right price.
Conclusion
China's rapid economic expansion is unstoppable. CapitaLand has been successful in China for the past 16 years. We have the experience, track record, reputation, capabilities and capacity to participate in the growth of China's real estate market. With all the new government controls, the property market will be harder to deal with. And local Chinese developers are getting more competitive.
But the market is immense there. To answer Jamie Dimon, we are more confident that CapitaLand will benefit from the Chinese government's measure to render stability to the property market.
To us, there is no stronger market in the world than China.
The writer is president & CEO, CapitaLand Group
Source: Business Times, 12 Jul 2010
Saturday, July 10, 2010
65m empty homes = one big bubble
Financial and social stability at risk, economist warns
BEIJING: China's property market remains dangerously overheated and failing to tame the speculative bubble could threaten financial and social stability, a prominent economist said in an official newspaper yesterday.
Dr Yi Xianrong, an economist at the Chinese Academy of Social Sciences, a government think-tank in Beijing, noted that estimates from electricity meter readings show 64.5 million empty apartments and houses in urban China, many of them bought by people wagering on a constantly rising property market.
In the overseas edition of the People's Daily, Dr Yi said the 'shocking' level of empty housing shows the dangers brought about by the country's property boom, which the central government has been trying to cool.
'If this outsized property bubble does not burst, it will hurt residents' well-being, and also affect national financial security and coordinated national economic development,' wrote Dr Yi.
The People's Daily is the main newspaper of China's ruling Communist Party, and the overseas edition is a small- circulation offshoot that tends to be more forthright than the main, domestic edition. While the paper is not an unerring mirror of official policy, Dr Yi's commentary suggests that the real estate market remains a worry for policymakers.
On Tuesday, Dr Kenneth Rogoff, a Harvard University economics professor and former chief economist at the International Monetary Fund, said China's property market was beginning a 'collapse' that would hit the nation's banking system.
Beijing has announced a slew of measures over the past months to cool the property market, including raising downpayments and mortgage rates, and the move has already caused deal volumes to drop and property inflation to slow in many cities.
Nationwide, property prices rose 0.2 per cent in May from a month earlier, and were 12.4 per cent higher than a year earlier. The increases were smaller than in April.
Property prices will fall within a few months as government steps to cool the real estate market bite deeper, Mr Xu Shaoshi, the Minister of Land and Resources, said on Sunday.
But Dr Yi suggested that more robust steps are needed to beat back property price rises fuelled by speculation.
'The problem now is that investment in the domestic property market has completely overturned China's traditional concepts of wealth management and investment and its price formation system,' he wrote.
REUTERS
Source: Straits Times, 10 Jul 2010
BEIJING: China's property market remains dangerously overheated and failing to tame the speculative bubble could threaten financial and social stability, a prominent economist said in an official newspaper yesterday.
Dr Yi Xianrong, an economist at the Chinese Academy of Social Sciences, a government think-tank in Beijing, noted that estimates from electricity meter readings show 64.5 million empty apartments and houses in urban China, many of them bought by people wagering on a constantly rising property market.
In the overseas edition of the People's Daily, Dr Yi said the 'shocking' level of empty housing shows the dangers brought about by the country's property boom, which the central government has been trying to cool.
'If this outsized property bubble does not burst, it will hurt residents' well-being, and also affect national financial security and coordinated national economic development,' wrote Dr Yi.
The People's Daily is the main newspaper of China's ruling Communist Party, and the overseas edition is a small- circulation offshoot that tends to be more forthright than the main, domestic edition. While the paper is not an unerring mirror of official policy, Dr Yi's commentary suggests that the real estate market remains a worry for policymakers.
On Tuesday, Dr Kenneth Rogoff, a Harvard University economics professor and former chief economist at the International Monetary Fund, said China's property market was beginning a 'collapse' that would hit the nation's banking system.
Beijing has announced a slew of measures over the past months to cool the property market, including raising downpayments and mortgage rates, and the move has already caused deal volumes to drop and property inflation to slow in many cities.
Nationwide, property prices rose 0.2 per cent in May from a month earlier, and were 12.4 per cent higher than a year earlier. The increases were smaller than in April.
Property prices will fall within a few months as government steps to cool the real estate market bite deeper, Mr Xu Shaoshi, the Minister of Land and Resources, said on Sunday.
But Dr Yi suggested that more robust steps are needed to beat back property price rises fuelled by speculation.
'The problem now is that investment in the domestic property market has completely overturned China's traditional concepts of wealth management and investment and its price formation system,' he wrote.
REUTERS
Source: Straits Times, 10 Jul 2010
Friday, July 9, 2010
Suzhou aspires to be the world's office
It also aims to be a hub for science, technology and innovative projects
AFTER years of being the 'world's factory', the Suzhou Industrial Park (SIP), together with Suzhou city, is now embarking on a transformation to become the 'world's office' in a bid to re-invent itself.
The goal was made known at a media briefing during which Suzhou government officials shared their plans for the city as well as the landmark Sino-Singapore project, SIP.
By 'world's office', Suzhou party secretary Jiang Hong Kun was referring to a hub for services, such as in software outsourcing, financial, logistics & exhibition and commercial tourism. There will also be a new focus on science and technology projects and innovative activities.
'Following the global financial crisis period, the world economy is undergoing major adjustments and restructuring,' said Mr Jiang, in Mandarin. 'China, which has often been deemed the world's factory, also hopes to achieve economic transformation. As for Suzhou, it has also been heavily focused on manufacturing in the past and our hope is to tap on the opportunities available to speed up the economic development and move towards more advanced manufacturing and scientific activities.'
The transformation of Suzhou and SIP will see a deepening and broadening of relationships between Singapore and China, as governments from both sides have signed a letter of intent to deepen the cooperation. Separately, cooperation for 31 projects have been inked. Among the Singapore organisations involved are the National University of Singapore, which will be setting up an incubator office at the SIP, the Singapore Exchange, and the Singapore Nanotech Association. Altogether, the 31 projects would lead to total investments exceeding US$1.6 billion.
Currently, about 60 new jobs have been created by 44 Chinese and foreign companies in SIP. They include positions in electronics, precision engineering, education, finance and biomedical sectors.
At a symposium attended by the private sector, Suzhou mayor Yan Li also highlighted the nanotechnology and environment sectors among the emerging industries that his city is promoting. Minister of State for Trade & Industry Lee Yi Shyan suggested that both sides also encourage the exchange of talent to facilitate cross-learning. Started in 1994, the SIP has become a benchmark for other industrial parks in China and an expression of the strong Sino-Singapore ties built over 20 years. Beyond the SIP, Suzhou itself is Singapore's leading trading partner in China's Jiangsu region.
The SIP is managed by the China-Singapore Suzhou Industrial Park Development Co (CSSD), which is preparing for a listing within the next one to two years. Officials said the option is still open as to whether the listing site will be in Singapore or China.
Source: Business Times, 9 Jul 2010
AFTER years of being the 'world's factory', the Suzhou Industrial Park (SIP), together with Suzhou city, is now embarking on a transformation to become the 'world's office' in a bid to re-invent itself.
The goal was made known at a media briefing during which Suzhou government officials shared their plans for the city as well as the landmark Sino-Singapore project, SIP.
By 'world's office', Suzhou party secretary Jiang Hong Kun was referring to a hub for services, such as in software outsourcing, financial, logistics & exhibition and commercial tourism. There will also be a new focus on science and technology projects and innovative activities.
'Following the global financial crisis period, the world economy is undergoing major adjustments and restructuring,' said Mr Jiang, in Mandarin. 'China, which has often been deemed the world's factory, also hopes to achieve economic transformation. As for Suzhou, it has also been heavily focused on manufacturing in the past and our hope is to tap on the opportunities available to speed up the economic development and move towards more advanced manufacturing and scientific activities.'
The transformation of Suzhou and SIP will see a deepening and broadening of relationships between Singapore and China, as governments from both sides have signed a letter of intent to deepen the cooperation. Separately, cooperation for 31 projects have been inked. Among the Singapore organisations involved are the National University of Singapore, which will be setting up an incubator office at the SIP, the Singapore Exchange, and the Singapore Nanotech Association. Altogether, the 31 projects would lead to total investments exceeding US$1.6 billion.
Currently, about 60 new jobs have been created by 44 Chinese and foreign companies in SIP. They include positions in electronics, precision engineering, education, finance and biomedical sectors.
At a symposium attended by the private sector, Suzhou mayor Yan Li also highlighted the nanotechnology and environment sectors among the emerging industries that his city is promoting. Minister of State for Trade & Industry Lee Yi Shyan suggested that both sides also encourage the exchange of talent to facilitate cross-learning. Started in 1994, the SIP has become a benchmark for other industrial parks in China and an expression of the strong Sino-Singapore ties built over 20 years. Beyond the SIP, Suzhou itself is Singapore's leading trading partner in China's Jiangsu region.
The SIP is managed by the China-Singapore Suzhou Industrial Park Development Co (CSSD), which is preparing for a listing within the next one to two years. Officials said the option is still open as to whether the listing site will be in Singapore or China.
Source: Business Times, 9 Jul 2010
Thursday, July 8, 2010
Ascott wins two more China Somerset contracts
CAPITALAND'S wholly owned service residence business unit, The Ascott Limited, has secured contracts to manage two more properties, one each in Xi'an and Shenzhen.
This follows the group's recent expansion into Chengdu with the opening of Somerset Riverview, Chengdu in April.
The latest additions - Somerset Gaoxin, Xi'an and Somerset Grandview, Shenzhen - are scheduled to open in 2012 and 2013 respectively.
Lee Chee Koon, Ascott's managing director for North Asia, said: 'China is an important market for Ascott.
'Besides growing in cities such as Beijing and Shanghai, we have been expanding rapidly in other cities like Xi'an and Shenzhen where there is high demand for service residences.'
The group's Citadines Xi'an Central and Somerset Garden City, Shenzhen have achieved occupancy of above 80 per cent.
It will open Ascott Maillen Shenzhen this year, and two more Citadines-branded service residences in Xi'an by 2012.
The two latest Somerset-branded properties will increase the group's portfolio to more than 5,500 apartment units in 29 properties across 13 cities.
Somerset Gaoxin, Xi'an is Ascott's first Somerset- branded service residence in the city. It is located on Tang Yan Road, which is within the new commercial centre of the Xi'an Hi-tech Development Zone.
The project is part of a mixed development which comprises a clubhouse and a retail podium.
Somerset Grandview, Shenzhen is on Xinsha Road, close to the Futian Central Business District. The property is next to the Shenzhen Golf and Country Club and close to high-end office towers, shopping malls, and food and beverage outlets.
Both the 233-unit Somerset Gaoxin, Xi'an and 128- unit Somerset Grandview, Shenzhen will offer a range of apartment types from studios to three-bedroom units, catering to the different needs of both short- and long-stay travellers.
All apartments come with a fully equipped kitchen, ensuite bathroom and separate living and work areas.
Source: Business Times, 8 Jul 2010
This follows the group's recent expansion into Chengdu with the opening of Somerset Riverview, Chengdu in April.
The latest additions - Somerset Gaoxin, Xi'an and Somerset Grandview, Shenzhen - are scheduled to open in 2012 and 2013 respectively.
Lee Chee Koon, Ascott's managing director for North Asia, said: 'China is an important market for Ascott.
'Besides growing in cities such as Beijing and Shanghai, we have been expanding rapidly in other cities like Xi'an and Shenzhen where there is high demand for service residences.'
The group's Citadines Xi'an Central and Somerset Garden City, Shenzhen have achieved occupancy of above 80 per cent.
It will open Ascott Maillen Shenzhen this year, and two more Citadines-branded service residences in Xi'an by 2012.
The two latest Somerset-branded properties will increase the group's portfolio to more than 5,500 apartment units in 29 properties across 13 cities.
Somerset Gaoxin, Xi'an is Ascott's first Somerset- branded service residence in the city. It is located on Tang Yan Road, which is within the new commercial centre of the Xi'an Hi-tech Development Zone.
The project is part of a mixed development which comprises a clubhouse and a retail podium.
Somerset Grandview, Shenzhen is on Xinsha Road, close to the Futian Central Business District. The property is next to the Shenzhen Golf and Country Club and close to high-end office towers, shopping malls, and food and beverage outlets.
Both the 233-unit Somerset Gaoxin, Xi'an and 128- unit Somerset Grandview, Shenzhen will offer a range of apartment types from studios to three-bedroom units, catering to the different needs of both short- and long-stay travellers.
All apartments come with a fully equipped kitchen, ensuite bathroom and separate living and work areas.
Source: Business Times, 8 Jul 2010
No new property tightening for China
(BEIJING) China has no plans to launch a new round of property market tightening in the third quarter, a senior official said in remarks published yesterday, refuting earlier media reports.
Wang Yulin, deputy research head with the Ministry of Housing and Urban-Rural Development, said the government would step up efforts to implement tightening measures which have already been announced to rein in the red-hot housing market, including curbs on purchases of multiple homes and restrictions on lending to property developers.
Minister of Land and Resources Xu Shaoshi said on Sunday that property prices would fall in Q3 as the tightening campaign continued, which was interpreted by some media as indicating that China was planning a new round of curbs.
'Such media reports embellished his remarks,' Mr Wang told the Oriental Morning Post in Shanghai. He added that China's property market would not experience a hard landing this year. -- Reuters
Source: Business Times, 8 Jul 2010
Wang Yulin, deputy research head with the Ministry of Housing and Urban-Rural Development, said the government would step up efforts to implement tightening measures which have already been announced to rein in the red-hot housing market, including curbs on purchases of multiple homes and restrictions on lending to property developers.
Minister of Land and Resources Xu Shaoshi said on Sunday that property prices would fall in Q3 as the tightening campaign continued, which was interpreted by some media as indicating that China was planning a new round of curbs.
'Such media reports embellished his remarks,' Mr Wang told the Oriental Morning Post in Shanghai. He added that China's property market would not experience a hard landing this year. -- Reuters
Source: Business Times, 8 Jul 2010
China property market set for 'healthy' correction
Prices in 70 Chinese cities rose 12.4% in May, the 2nd-fastest pace on record
(BEIJING) China's home prices are set to fall as much as 20 per cent in a 'healthy' correction, said Michael Klibaner, head of China research at Jones Lang LaSalle Inc.
China's property boom is 'cash-driven' rather than 'leverage-fuelled', which means there's only a low chance of the type of forced selling that exacerbated the US housing market collapse, he said in a Bloomberg Television interview yesterday.
That view contrasts with Harvard University's Kenneth Rogoff's prediction on Tuesday of a 'collapse' in China's property market that will hit the nation's banking system.
Property prices in 70 Chinese cities rose 12.4 per cent in May, the second- fastest pace on record, heightening concern a bubble is forming in the nation's housing market.
Shanghai's new-home sales fell 70 per cent from a year ago in June, Changjiang Securities Co said in a report on Tuesday, adding to signs government measures including increased interest rates and down payments on second mortgages are cooling the market.
'We actually expect a very healthy correction, something in the order of 15 or 20 per cent in terms of price correction,' Mr Klibaner said yesterday.
'But we don't see any reason why there will be a risk of a crash at the moment.' Jones Lang LaSalle is the second-largest publicly traded commercial property broker.
As China's economy develops, 'especially at the speed it's growing, it's going to have bumps', said Mr Rogoff, speaking in an interview with Bloomberg Television on Tuesday.
'You're starting to see that collapse in property and it's going to hit the banking system,' said Mr Rogoff, 57, the former chief economist of the International Monetary Fund.
Mr Klibaner's forecast echoes the view of Nomura Holdings Inc economists Sun Mingchun and Sun Chi, who said China's average home price may fall as much as 20 per cent in the next 12 to 18 months.
That won't have a big impact on China's economy, they said in a July 5 report.
Chinese authorities intensified a crackdown on property speculation after announcing the economy expanded at an 11.9 per cent annual pace in the first quarter, the most since 2007. -- Bloomberg
Source: Business Times, 8 Jul 2010
(BEIJING) China's home prices are set to fall as much as 20 per cent in a 'healthy' correction, said Michael Klibaner, head of China research at Jones Lang LaSalle Inc.
China's property boom is 'cash-driven' rather than 'leverage-fuelled', which means there's only a low chance of the type of forced selling that exacerbated the US housing market collapse, he said in a Bloomberg Television interview yesterday.
That view contrasts with Harvard University's Kenneth Rogoff's prediction on Tuesday of a 'collapse' in China's property market that will hit the nation's banking system.
Property prices in 70 Chinese cities rose 12.4 per cent in May, the second- fastest pace on record, heightening concern a bubble is forming in the nation's housing market.
Shanghai's new-home sales fell 70 per cent from a year ago in June, Changjiang Securities Co said in a report on Tuesday, adding to signs government measures including increased interest rates and down payments on second mortgages are cooling the market.
'We actually expect a very healthy correction, something in the order of 15 or 20 per cent in terms of price correction,' Mr Klibaner said yesterday.
'But we don't see any reason why there will be a risk of a crash at the moment.' Jones Lang LaSalle is the second-largest publicly traded commercial property broker.
As China's economy develops, 'especially at the speed it's growing, it's going to have bumps', said Mr Rogoff, speaking in an interview with Bloomberg Television on Tuesday.
'You're starting to see that collapse in property and it's going to hit the banking system,' said Mr Rogoff, 57, the former chief economist of the International Monetary Fund.
Mr Klibaner's forecast echoes the view of Nomura Holdings Inc economists Sun Mingchun and Sun Chi, who said China's average home price may fall as much as 20 per cent in the next 12 to 18 months.
That won't have a big impact on China's economy, they said in a July 5 report.
Chinese authorities intensified a crackdown on property speculation after announcing the economy expanded at an 11.9 per cent annual pace in the first quarter, the most since 2007. -- Bloomberg
Source: Business Times, 8 Jul 2010
Tuesday, July 6, 2010
Glorious Property cautious on H2 sales outlook
(HONG KONG) Chinese developer Glorious Property says it is cautious about the outlook for sales later this year, after the central government unveiled harsh measures to rein in the red-hot property sector.
The Shanghai-based developer logged contracted sales of 4.2 billion yuan (S$862 million) in the first six months of this year, up about a third from the same period a year earlier, senior executives said yesterday. In June alone, contracted sales were 890 million yuan, up from about 220 million yuan in May, they said, adding that there were uncertainties for the remainder of the year.
'We are quite cautious about the second half. We'll mainly be monitoring property policies - whether the government adopts a tightening or loosening attitude,' CEO Cheng Lixiong told a news conference here.
In mid-April, China announced a series of property measures to tighten the market, such as raising minimum downpayments and mortgage rates for second homes, and raising downpayments for first-home buyers purchasing huge apartments.
Urban property prices rose an annual 12.4 per cent in May, easing from April when prices climbed at a record pace, government data showed. Compared with April, May prices were up 0.2 per cent, also trending lower.
The tightening measures, coupled with Europe's debt crisis, are also prompting the developer to put its plans to issue a dollar bond on hold. 'The debt market is too volatile now. We feel that it's not the right time to issue the bonds because of demand uncertainty and the costs of issuing,' Mr Cheng said. -- Reuters
Source: Business Times, 6 Jul 2010
The Shanghai-based developer logged contracted sales of 4.2 billion yuan (S$862 million) in the first six months of this year, up about a third from the same period a year earlier, senior executives said yesterday. In June alone, contracted sales were 890 million yuan, up from about 220 million yuan in May, they said, adding that there were uncertainties for the remainder of the year.
'We are quite cautious about the second half. We'll mainly be monitoring property policies - whether the government adopts a tightening or loosening attitude,' CEO Cheng Lixiong told a news conference here.
In mid-April, China announced a series of property measures to tighten the market, such as raising minimum downpayments and mortgage rates for second homes, and raising downpayments for first-home buyers purchasing huge apartments.
Urban property prices rose an annual 12.4 per cent in May, easing from April when prices climbed at a record pace, government data showed. Compared with April, May prices were up 0.2 per cent, also trending lower.
The tightening measures, coupled with Europe's debt crisis, are also prompting the developer to put its plans to issue a dollar bond on hold. 'The debt market is too volatile now. We feel that it's not the right time to issue the bonds because of demand uncertainty and the costs of issuing,' Mr Cheng said. -- Reuters
Source: Business Times, 6 Jul 2010
Hot money flowing into Chinese property, stocks
Most of the speculative and arbitrage capital from overseas that has entered China in recent months has ended up in the property and equity markets, an official at the country’s foreign-exchange regulator said in rare comments as the agency usually plays down the effect of hot money inflows into China.
An investigation that began in February has uncovered 190 cases of hot money inflows involving US$7.35 billion ($10.23 billion), Mr Deng Xianhong, a vice-director at the State Administration of Foreign Exchange (Safe), said in an interview published yesterday in the state-run People’s Daily.
“A situation of continuous foreign exchange fund inflows forms easily,” Mr Deng said.
“Higher interest rates for the yuan compared to foreign currencies and expectations of yuan appreciation create very strong attractions for overseas capital … The resulting higher domestic stock and property prices and strengthened expectations of a stronger yuan lead to further foreign exchange fund inflows,” he said.
Rather than attracting hot money, the yuan exchange rate should be a means of getting rid of inflows of such funds, Mr Deng said.
The comments come after the People’s Bank of China (PBOC) loosened the yuan’s exchange-rate mechanism on June 19 in a surprise move.
The PBOC set the US dollar-yuan central parity rate at 6.7733 yesterday, compared to 6.7720 on Friday.
China’s property prices have risen steadily over the past year, leading Beijing to introduce a series of measures to cool the sector, including higher minimum downpayments and other requirements.
Home prices were up for the 12th straight month in May from a year earlier, though the rate of increase slowed slightly from the previous month.
The benchmark Shanghai Composite Index has fallen 28 per cent this year as Beijing withdraws the stimulus measures introduced to cushion the effects of the financial crisis.
China yesterday also revised up its first-quarter current account surplus to US$53.6 billion from US$40.9 billion, according to a statement on the Safe website.
Source: Today, 6 Jul 2010
An investigation that began in February has uncovered 190 cases of hot money inflows involving US$7.35 billion ($10.23 billion), Mr Deng Xianhong, a vice-director at the State Administration of Foreign Exchange (Safe), said in an interview published yesterday in the state-run People’s Daily.
“A situation of continuous foreign exchange fund inflows forms easily,” Mr Deng said.
“Higher interest rates for the yuan compared to foreign currencies and expectations of yuan appreciation create very strong attractions for overseas capital … The resulting higher domestic stock and property prices and strengthened expectations of a stronger yuan lead to further foreign exchange fund inflows,” he said.
Rather than attracting hot money, the yuan exchange rate should be a means of getting rid of inflows of such funds, Mr Deng said.
The comments come after the People’s Bank of China (PBOC) loosened the yuan’s exchange-rate mechanism on June 19 in a surprise move.
The PBOC set the US dollar-yuan central parity rate at 6.7733 yesterday, compared to 6.7720 on Friday.
China’s property prices have risen steadily over the past year, leading Beijing to introduce a series of measures to cool the sector, including higher minimum downpayments and other requirements.
Home prices were up for the 12th straight month in May from a year earlier, though the rate of increase slowed slightly from the previous month.
The benchmark Shanghai Composite Index has fallen 28 per cent this year as Beijing withdraws the stimulus measures introduced to cushion the effects of the financial crisis.
China yesterday also revised up its first-quarter current account surplus to US$53.6 billion from US$40.9 billion, according to a statement on the Safe website.
Source: Today, 6 Jul 2010
Friday, July 2, 2010
China's property buyers go global
With yuan's value set to rise, affluent Chinese are turning to foreign markets like S'pore and London
LONDON: China's notorious property bubble could become its next big export, with a stronger yuan giving the newly rich the buying power to splash out in the world's most sought-after property markets.
Buoyed by hopes of gains in the yuan after its peg to the United States dollar was shed on June 19, Chinese investors are chasing discounted apartments from London to Singapore with a view to reducing their exposure to an overheated domestic market.
A report by property broker DTZ in late May showed that Chinese buyers made up 17 per cent of foreign property purchases in Singapore in the first quarter, making them the third most prolific overseas buyers in the city-state.
'They want their capital to be global... It's a kind of diversification of risk,' said DTZ's head of consulting for North Asia Alva To.
Despite its vast state wealth and status as one of the world's strongest economies, China has so far been eclipsed by Middle Eastern investors, private equity funds and other sovereign buyers from South Korea or Singapore in terms of influence on overseas real estate markets.
Chinese property investors have so far mostly confined their acquisitions to domestic markets, pushing average prices up by 77 per cent in five years and forcing the government to enact tough measures to keep homes affordable.
With property tightening measures at home and the yuan's value set to firm, analysts see more buyers branching out into overseas markets that promise attractive gains with fewer restrictions.
'The whole economic situation (in China) is prone to change, and so people are looking for a safe haven for their money,' said Mr James Moss, managing director of upmarket British real estate services company Curzon Investment Property.
He disclosed that his client base was now 75 per cent Chinese, from 95 per cent expatriate British investors five years ago.
China abandoned a 23-month-old peg to the US dollar earlier last month and, even though analysts do not expect the currency to be fully convertible any time soon, further appreciation is likely, boosting the overseas purchasing power of Chinese investors.
Data from real estate broker Knight Frank showed more than one in 10 new residential properties in London were sold to Chinese or Hong Kong buyers in the year to March, the highest share of the market by any offshore investors.
In Hong Kong, a fifth of luxury apartments are purchased by mainland Chinese, said DTZ's Mr To.
A relentless rise in domestic property prices since house ownership was legalised in 1998 has fostered a strong preference for bricks and mortar over volatile equities among the Chinese, already known as strong savers and investors.
'I'm looking for investment opportunities outside China to save enough money for my daughter when she grows up,' said Ms Tracy Ma, 38, a Chinese executive who owns an apartment in Shenzhen in China's south, neighbouring Hong Kong.
China's gross aggregate savings rate now tops 50 per cent of gross domestic product, by far the highest of any big economy, with disposable income among the urban population rising 10 per cent last year, official data showed.
More than 90 per cent of China's households own the home they live in, while more than a quarter own a second property, a report from Asian brokerage CLSA said.
REUTERS
Source: Straits Times, 2 Jul 2010
LONDON: China's notorious property bubble could become its next big export, with a stronger yuan giving the newly rich the buying power to splash out in the world's most sought-after property markets.
Buoyed by hopes of gains in the yuan after its peg to the United States dollar was shed on June 19, Chinese investors are chasing discounted apartments from London to Singapore with a view to reducing their exposure to an overheated domestic market.
A report by property broker DTZ in late May showed that Chinese buyers made up 17 per cent of foreign property purchases in Singapore in the first quarter, making them the third most prolific overseas buyers in the city-state.
'They want their capital to be global... It's a kind of diversification of risk,' said DTZ's head of consulting for North Asia Alva To.
Despite its vast state wealth and status as one of the world's strongest economies, China has so far been eclipsed by Middle Eastern investors, private equity funds and other sovereign buyers from South Korea or Singapore in terms of influence on overseas real estate markets.
Chinese property investors have so far mostly confined their acquisitions to domestic markets, pushing average prices up by 77 per cent in five years and forcing the government to enact tough measures to keep homes affordable.
With property tightening measures at home and the yuan's value set to firm, analysts see more buyers branching out into overseas markets that promise attractive gains with fewer restrictions.
'The whole economic situation (in China) is prone to change, and so people are looking for a safe haven for their money,' said Mr James Moss, managing director of upmarket British real estate services company Curzon Investment Property.
He disclosed that his client base was now 75 per cent Chinese, from 95 per cent expatriate British investors five years ago.
China abandoned a 23-month-old peg to the US dollar earlier last month and, even though analysts do not expect the currency to be fully convertible any time soon, further appreciation is likely, boosting the overseas purchasing power of Chinese investors.
Data from real estate broker Knight Frank showed more than one in 10 new residential properties in London were sold to Chinese or Hong Kong buyers in the year to March, the highest share of the market by any offshore investors.
In Hong Kong, a fifth of luxury apartments are purchased by mainland Chinese, said DTZ's Mr To.
A relentless rise in domestic property prices since house ownership was legalised in 1998 has fostered a strong preference for bricks and mortar over volatile equities among the Chinese, already known as strong savers and investors.
'I'm looking for investment opportunities outside China to save enough money for my daughter when she grows up,' said Ms Tracy Ma, 38, a Chinese executive who owns an apartment in Shenzhen in China's south, neighbouring Hong Kong.
China's gross aggregate savings rate now tops 50 per cent of gross domestic product, by far the highest of any big economy, with disposable income among the urban population rising 10 per cent last year, official data showed.
More than 90 per cent of China's households own the home they live in, while more than a quarter own a second property, a report from Asian brokerage CLSA said.
REUTERS
Source: Straits Times, 2 Jul 2010
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