Changes in property rules suggested

Economic growth should not be overly dependent on the property sector, warns a report from the Chinese Academy of Social Science (CASS).

The report followed the CASS’s investigation into the US subprime mortgage crisis in June. It suggested  the government should rethink the development of the real estate sector, and clarify their role in the market.

Local governments used to bank on the real estate sector for economic growth and land transfer fees were regarded as the main source of local fiscal income.

Statistics from the National Bureau of Statistics show that investment in the real estate sector last year reached RMB2.53 trillion yuan ($370.13 billion), contributing 10.25% to the country’s GDP.

The report suggested that the government reform the housing fund management system and establish housing mortgage banks and companies dealing in securities to back housing mortgages.
Source: China Daily

Jones Lang LaSalle

Jones Lang LaSalle Head of Research (Asia Pacific) Dr. Jane Murray said in the report Asia Pacific Property Digest Second Quarter 2008, that ‘The Asia Pacific property markets are entering a correction phase that will continue over the next 12 months at least.’

Jane Murray, however, noted that in contrast to previous cycles, the extent of the downturn is expected to be moderate in most markets in Asia Pacific given the underlying sound fundamentals.

She  pointed out that potential oversupply is becoming an issue in some parts of the region, notably tier I cities in China.

The Jones Lang LaSalle report highlighted that the retail sector has continued to perform well over the first half of the year, with Hong Kong and Shanghai posting the highest rental growth in the region.

However, it said that emergence of more difficult trading conditions, coupled with new supply coming on line in number of markets is likely to result in more moderate rental growth going forward.
Source: Trading Markets

Gemdale Plaza

Gemdale, a property developer based in the southern Chinese city of Shenzhen, said its real estate sales tumbled 19% from the previous month to RMB779 million ($114 million) in August.

Sales rose from the previous month in terms of floor area, by 3.6% to 78,100 square meters.
Sales In the first eight months of this year, rose 2.7% from a year earlier in value terms to RMB6.71 billion but fell 16% to 629,500 square meters in terms of area.

That is an equation which suggests selling more for less.

The figures were the latest sign of a slowdown in China’s property market, which analysts said was compounded in August by the fact that the Beijing Olympics slowed business activity in the capital city and elsewhere.

Vanke, China’s biggest listed property developer, said the value of its real estate sales plunged 35% from a year earlier in August, while in terms of area, sales sank 33% during the month.
Source: Reuters

Chinese real estate

According to Hang Lung Properties, China will remain a major real estate powerhouse even after the Beijing Olympics and despite the backdrop of weaker property prices.

Chairman Ronnie Chan said long-term players would have to devise ways to overcome the bear market.

At the Forbes Global CEO forum he said, ‘Property is a long gestation industry.’

He said the biggest opportunity in China would include the large commercial and retail investments which could still bring in double-digit returns.

He said, ‘China is an opportunity of a lifetime and we are buying land for future projects.’

Hang Lung has allocated $5 billion for projects in China and already had nine projects under way.
Source: The Star Online

Commercial property

The People’s Bank of China (PBOC) and the China Banking Regulatory Commission (CBRC) are urging rigorous credit management on commercial property projects to curb possible risks that could threaten the banking sector.

The policy will have significant impact on property developers as financing will be more difficult.

No loan will be given to developers to cover land transfer costs.
Loans for land reserve acquisition will be secured by property developers through the use of a mortgage and require a legal land use certificate.
The amount of the loan shall be less than 70% of the estimated value of the project.
The credit period will be confined to two years.
No credit of any kind will be offered to projects where land had been idle for two years or more.
Provision of credit will be more cautious to government-approved construction projects that have not started within a year after a land concession contract was signed.

This would also apply to projects where its developed land area was less than one-third of the total, or where the investment was less than a quarter of the total within a year after starting construction.
Source: China View