China - Housing 01 (May 08 - May 10)

[winston]

Property prices see slowest rise in over three years

Property prices in China in October grew at their slowest pace in more than three years, government figures showed.

Prices in 70 major cities across the country rose by 1.6 percent year on year, down from 3.5 percent in September, said the National Development and Reform Commission.

The figure represents the lowest growth since the government started releasing monthly statistics of property prices in July 2005.

Property prices in Shenzhen posted the biggest loss among all the cities, declining 12.6 percent from a year earlier, according to a statement on the commission's website.

The weakening property market is likely to place further pressure on China's slowing economy as investment in the sector accounts for more than 20 percent of the country's urban fixed-asset inv

[winston]

Upside in China property S-chips? By ARTHUR SIM

WHILE most Singapore property developers are afflicted by the same predicament - over-supply, low confidence - the Chinese property market is as varied as its landscape.

Take property S-chip CentraLand for example.

Listed here in February, the price of Centra- Land shares at IPO is likely to have priced-in various poor economic data at the time. Even so, its IPO offer price of 50 cents has fallen only 4 per cent since, while share prices of most Singapore-based property developers are more likely to have fallen upwards of 60 per cent.

For the third quarter of 2008, revenue amounted to about 277.4 million yuan (S$62.1 million), recognised from delivery to buyers of 997 units of pre-sold retail and office units in its commercial property project, J-Expo in Zhengzhou.

Located in the Henan province, J-Expo is a wholesale commodities building in the heart of Zhengzhou city, located at the junction of the main road and rail network in central China. In a filing with SGX, CentraLand said Zhengzhou city enjoys good traffic and is an important wholesale centre, especially for women's apparel.

Not many would know this about Zhengzhou, much less know where it is. This being so, CentraLand, which is probably considered more 'exotic' compared to other China property S-chips, is not heavily traded.

Less exotic property S-chips like Yanlord, China New Town Development (CNTD) and Sunshine Holdings are traded more heavily. Their share prices have also fallen dramatically, in line with market movements.

Indeed, since the start of the year, Yanlord, CNTD and Sunshine share prices have fallen 80 per cent, 95 per cent and 92 per cent respectively to very low penny values.

But the paradox is that unlike Singapore (and much of the world) some markets in China, where some of these S-chips have projects, are actually seeing property prices recovering.

Citigroup analysts visiting numerous cities made several conclusions recently. They noted that inner cities like Chongqing and Chengdu looked less affected by the export slowdown and global financial crisis, as their economies are more domestic trade oriented.

In Chengdu, Citigroup added that activity has recovered slightly from the period immediately after the earthquake, but more importantly, it also sees a meaningful difference in terms of sales volume and prices versus the period before the earthquake.

Citigroup did not, however, notice meaningful rebounds in transaction prices and volumes in Shenzhen or Guangzhou, 'and the market is still clouded with the wait-and-see attitude of the potential buyers'.

Citigroup said that in Hangzhou, the provincial capital of Zhejiang province, the situation has been deteriorating, adding: 'As one of China's main export and manufacturing driven provinces, Zhejiang has been significantly impacted by the export slowdown and global financial crisis.'

On the other hand, Citigroup considers Shanghai as one of the most resilient in China, especially for projects located in prime locations. 'We don't see any significant price cuts in the high-end/luxury-end residential projects,' it said, adding that in the past two years, there has also been limited new land supplies in the city centre.

Different Chinese cities also appear to have different property cycles. DTZ Research reveals that property prices in Shanghai peaked at the end of 2005 and then plummeted for a year before rising steadily since the end of 2006.

DTZ's Shanghai property price index rose 40 per cent in Q3 2008 compared with the previous trough in Q4 2006. Prices continued to increased by 3 per cent quarter-on-quarter in Q3 2008 and 5.2 per cent compared with Q4 2007.

In Guangzhou and Shenzhen, however, property prices only peaked in Q4 and Q3 of 2007 respectively. While prices have recovered somewhat in Guangzhou - with the DTZ price index rising 2 per cent since the previous trough - Shenzhen prices have fallen 16 per cent since Q3 2007.

More interestingly, Beijing prices have been increasing for four years, registering an 8.1 per cent quarter-on-quarter increase in Q3 2008.

Each city appears to react to different micro-economic factors like land scarcity, high levels of speculation, or even the efficiency of local governments to implement policy changes (curiously, the Chinese government's relaxation on mortgage lending in October has not had an impact on share prices).

As such, finding value in the Chinese property market takes a lot of work. But at the same time, it should help to separate the wheat from the chaff.

[winston]

Funds eye risky China property, but deals may be a year away
By Alex Frew McMillan

HONG KONG, Nov 24 (Reuters) - Property investors are pencilling "second-half, 2009" in their diaries as the likely time to start pouring money into China again as they search for bargains in its ailing real estate market.

But they are wary of slowing economic growth, overbuilding in some areas, difficult partnerships with developers and red tape.

Private equity fund manager Gaw Capital Partners is looking to raise up to $1.5 billion for Chinese property, while ING Real Estate is marketing a $750 million fund it wants to launch in the first quarter of next year.

"I think it's a good time to start looking," said Goodwin Gaw, co-founder of Gaw Capital, which manages $4.7 billion of assets in 14 Chinese projects. "2009 and early 2010 could be a sweet spot."

Many among the 540 investor groups at the MIPIM Asia property conference in Hong Kong last week pinpointed China as the market that would recover quickest from the global economic crisis because of growing domestic demand for housing and office space. And they are keen to raise funds to prepare.

Behind the enthusiasm is a hope that capital-starved property firms will offer plum investment deals to foreign investors looking for internal rates of return of 25-30 percent.

Chinese developers are suffering because capital markets have clammed up and banks clamped down on loans to the industry as part of government efforts to stamp out property speculation and cool the economy.

Beijing's moves sparked property price slides of as much as 20-30 percent in some cities, particularly in the south. Now, faced with cooling economic growth and the prospect of higher unemployment rates, the government is back-pedalling, trying to stimulate the housing market to boost domestic demand.

"We don't see them taking the brakes off completely because they still want to encourage affordability," said Nicholas Brooke, the chairman of consultants Professional Property Services.

"They had a nice Chinese way of managing things. But then they get the financial crisis on top of it. That has rather thrown out their planning."

Investors and developers are now eschewing the luxury end of the housing market, which was the most lucrative and speculative segment in recent years, and are targeting mass-market housing. They also favour "second tier" cities such as Chengdu, Chongqing and Dalian.

Beijing, afraid of social unrest, has tried to promote construction of low-cost housing and stop prices spiralling out of sight for average urban residents.

"You have got to go in the direction of the government -- don't fight them," Gaw said.

China has announced 4 trillion yuan ($586 billion) in fiscal stimulus measures, with 800 billion yuan going to low-income housing and 1 trillion yuan on infrastructure spending.

While economists admit they do not know how much is new spending, they believe more steps are in the offing -- probably tax and interest rate cuts and perhaps more spending in earthquake-hit Chengdu.

Fund managers say they are still seeing demand for China exposure from U.S. and European investors, as well as sovereign wealth funds, who are bullish on the country's future despite the current economic slowdown.

In 2007, China overtook the United States as the greatest contributor to global growth. Although its economy is still four times smaller than the United States, China has been growing at an average annual 11 percent rate since 2005.

And even if economic growth slows to 7.25 percent or 7.5 percent in the next couple of years because of slowing exports, as some economists predict, urbanization and the emergence of a middle class will still spur housing demand.

China is one of the few markets in Asia, along with Japan and South Korea, that offer the kind of scale that would attract institutional investment, said ING Real Estate's Asia chief executive, Richard Price. But investment also carries dangers.

"In second-tier or third-tier cities, you could not only not make returns but walk away from equity," Price said.

Among the risks are red tape associated with setting up a company to invest in China and repatriating profits, and oversupply in some areas -- for example, office blocks in Beijing, and shopping centres in major cities.

"There are 200 shopping centres going to be built in China and India over the next two years," William Glover, the Hong Kong-based international director of property recruitment consultancy MacDonald & Co., said. This crisis "is not all about investment banks".

As big, established listed companies are now desperate for funds to finish their projects, foreign funds are no longer limited to hatching deals with shady small developers.

But having heard many horror stories, many investors are wary, including Tim Grady, who is in charge of Merrill Lynch's new $2.65 billion fund for Asia property.

[winston]

From UOB-Kay Hian:-

More stimulus policies to be introduced. According to Qi Ji, vice minister of the Ministry of Housing, both the central and local governments will launch more powerful policies to stimulate housing consumption. The second-home policies could be relaxed too.

Meanwhile, the media also reported that Ministry of Housing is doing research on resuming the housing purchase tax rebate scheme, which was implemented during 1998-2003 in Shanghai. Nonetheless, we believe this is a conceptual idea rather than a policy that could materialise in the near term.

We believe market expectation on more supportive policies ahead remains the catalyst in the near term. We continue to favour China Resources Land (1109 HK/BUY/Target: HK$13.80), Guangzhou R&F (2777 HK/BUY/Target:HK$7.40) and Shimao Property (813 HK/BUY/Target: HK$6.80).

[millionairemind]

China Property Slump Threatens Global Economy as Growth Slows
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By Kevin Hamlin

Dec. 2 (Bloomberg) -- House prices in Shanghai, Shenzhen and Guangzhou are plunging, and the global economy may grind almost to a halt next year because of it.

Construction of homes, offices and factories fell at least 16.6 percent in October after rising 32.5 percent a year earlier, according to Macquarie Securities Ltd. That's squeezing an economy already slowed by recessions in the U.S., Japan and Europe that have cut demand for exports. Building is the biggest driver of China's expansion, contributing a quarter of fixed- asset investment and employing 77 million people.
http://www.bloomberg.com/apps/news?pid= ... refer=home

[kennynah]

heard from a girl from qing dao this evening.... property prices....dropping big time

[millionairemind]

Published December 4, 2008

Developers in China scramble to raise cash

(BEIJING) Suffering from a slumping housing market, Chinese developers are scrambling to find new ways to keep the cash flowing in and creditors at bay, with anything from factories to timeshares in their sights.

An oversupply of new apartments in an economic downturn, and the lingering effects of government steps to stamp out rampant property speculation have sent home sales and prices tumbling.

Capital markets are closed, and loans have dried up.

'Banks give you an umbrella when it's sunny and want it back when it's raining,' said Li Xiaodong, chairman of J&J Assets Management, whose US$300 million fund invests with property firms.

'So you have to choose products that are more suitable for the market at the moment,' he advised developers at a conference in Beijing. 'There's money out there, but there's no confidence.'

In a five-year boom, China's developers grew quickly and notched up huge profit margins, often of as much as 50 per cent, as they built on land accumulated cheaply and sold apartments in a fast rising market.





But many who bought land at a 2007 price peak are suffering now, with sales down by as much as half from last year. The country's biggest developer, China Vanke, has slashed prices by a third, and others have gone further. And now they are looking away from housing. Beijing-based Antaeus Group is selling rooms at Hainan island resorts, giving buyers stays of 30 days each year and a share of room rates.

'A lot of movie stars and real estate developers are buying,' said the firm's chairman, Zhang Baoquan. 'We need to survive the winter,' he said of the market downturn. 'But once spring comes, demand will be released.'

Shanghai-listed developer Vantone Estate aims to spend three billion yuan (S$667.2 million) on industrial property in the next couple of years, according to Wu Dongwei, general manager at the unit responsible for the venture.

His first deal, which is still being negotiated, is for a factory in Wuxi that will be bought and leased back to a television maker faced with slowing exports.

'We're trying to diversify,' Mr Wu told Reuters. 'There are a lot of companies that bought a lot of land very cheaply, or for zero because local governments gave it to them,' he added. 'But now is a very bad time, so they're trying to get more cash in and divesting assets.'

Holding investment properties usually produces much lower returns on assets than building homes because equity is tied up for much longer.

But Hong Kong developers have used the tactic well to smooth earnings, in a volatile property market. Office and retail rents are typically renegotiated every three years, while industrial and warehouse property leases can last a decade. -- Reuters

[winston]

Guangzhou R&F Properties (2777.HK: Quote, Profile, Research, Stock Buzz) soared 12.4 percent. Official newspapers on the mainland have reported this week that China might soon launch real estate investment trusts (REITs) on a trial basis.

[millionairemind]

Published December 11, 2008

Urban property prices up in China
(SHANGHAI) China's urban property prices rose 0.2 per cent year-on-year (yoy) in November, lower than the 1.6 per cent rise in October and the slowest growth in more than three years, according to official figures.

Prices in 70 major cities across the country rose by 0.2 per cent year-on-year, the National Development and Reform Commission, China's top economic planning agency said in a statement on its website on Tuesday.

The figure represents the lowest growth since the government started releasing monthly statistics of property prices in July 2005.

[winston]

China to Cut Tax, Ease Home Sale Rules to Help Market
By Eugene Tang and Luo Jun

Dec. 17 (Bloomberg) -- China’s government plans to lower taxes and reduce the lockup period for home sales to stem a decline in the nation’s property market.

A sales tax on properties sold will be waived after two years of purchase, compared with the previous term of five years, according to a statement today by the State Council, China’s cabinet. The tax will also be levied based on the profit from the sale, instead of the sale price, according to the announcement.

China’s residential home sales dropped 20.6 percent in the first 11 months from a year earlier, according to the statistics bureau. Falling home prices are squeezing an economy already hurt by recessions in the U.S., Japan and Europe. Building is the biggest driver for China’s expansion, contributing a quarter of fixed-asset investment and employing 77 million people.

China’s economy is projected to expand 7.5 percent next year, the slowest pace in almost two decades, as the global financial crisis deepens, the World Bank said last month. The country’s central bank reduced borrowing costs for the first time in six years on Sept. 15, the day Lehman Brothers Holdings Inc. filed for bankruptcy. It cut rates three times since then and the government said “forceful” measures were needed to arrest a faster-than-expected economic decline.

In a statement posted earlier today on the government’s Web site, the minimum holding period was shortened to three years. It was changed to two years in a re-issued statement.

Government Lender Call

The government today called on lenders to increase loans to developers of low-priced housing to alleviate an estimated shortage of 7.5 million homes in cities and 2.4 million in rural parts of China.

The National Development and Reform Commission said in a separate statement today that it will offer 10 billion yuan of subsidies on affordable housing.

The government will also ease ownership rules, allowing people with smaller-than-average apartments to buy a second apartment at a preferential lending rate only available to first-time home buyers previously, according to the statement.

Property-related lending gained 30 percent annually in the past two years in China, twice as much as overall loan growth, according to Moody’s Investors Service. That raised concerns an asset-bubble burst may leave Chinese banks with more non- performing loans.

Shanghai house prices fell 19.5 percent in the third quarter from the previous three months, according to real estate broker Savills Plc. Construction will contract 30 percent next year after expanding 9 percent in the first three quarters of 2008, according to Macquarie Securities.