ING Real Estate, a unit of Dutch financial group ING, which has around $200 billion under management globally, is currently marketing a fund for China, which it hopes will bring in $750 million, mostly for building housing. Part of the plan is it expects troubled landlords and developers to offload bargain properties.

Many developers, struggling with a clampdown on bank lending and a dismal market for initial public offerings, lack the cash to finish projects and are expected to offload land and unfinished buildings.

ING, which already runs a $500 million fund in China, plans to continue working on projects with Chinese developers Shanghai Forte Land , Gemdale and Longfor, which wants to launch a Hong Kong initial public offering in the next three months.

Richard van den Berg, head of China for ING Real Estate, said, ‘You don’t turn the tables on your partners when the market turns in your favor.’

The China fund will target internal rates of return (IRR) of over 20%.
Source: Reuters

It is easy to get confused as the heading shows; almost impossible to see an overall pattern. In April non-residential property prices grew 6.5%, rate of growth down 0.4 percentage points.

So non-residential was going up, but not as much as it used to. This decline in the rise is patchy. And there are places where it is all decline.

According to a report released by Centaline (China) Shenzhen-Hong Kong Property Research Center, the average housing price in Shenzhen’s six districts dropped to RMB11,143 per square meter in May, down 23% from a year ago and 7% from April, on Tuesday. Those are substantial drops.

Can Shenzhen can look forward to boom times again?

Wang Shitai, brand manager of Sunstars Real Estate in Shenzhen said, ‘Despite the rise in transactions, I’m not optimistic about Shenzhen’s housing market in the near future.
‘Developers will have to slash prices further in order to boost sales to maintain their businesses. Many have offered prices as low as RMB5,500 per square meter in order to attract enough buyers.’

China Overseas Property, a major real estate developer in Shenzhen, launched a new housing estate, Xi’an Huafu, in Bao’an District on May 31, with opening prices of RMB5,500 per square meter, the lowest in the district this year.

The developer launched another project, Kangcheng Guoji, in early June, and set the opening price at RMB4,988 per square meter.

So, no, the boom days are not likely to return in the near future. And, yes, this is what the government was working towards.

Guo Shiping, an economics professor at Shenzhen University, said ‘When prices drop further and more investors fail to pay the mortgages, all of them will suffer.’ That is what happened with the sub-prime crisis in the United States. Only in China it will not be such a disaster.
Source: Window of China

The headline comes from the International Herald Tribune which is not normally given to gloomy stories.

It reports that although official figures show investment in property rose 32% in the first four months from a year earlier, developers are worried as bank loans dry up and the cost of tapping other sources of funds rises.

Falling home sales are a particular threat to developers, who typically rely heavily on cash from the sale of unfinished projects to pay for operations and expand.

According to the China Index Academy, which is affiliated with SouFun.com, a leading real estate Web site, the number of residential transactions in Beijing fell 13.7% in April from March and was down 56.4% from a year earlier.

Not a happy scene.

Zhang Xinming, chairman of Walter Asia, a developer based in Jiangxi Province, said maximizing cash flow was now his main strategy.

Walter Asia has accelerated the development of land that it had bought cheaply, hoping to cash in quickly.

It is also shifting its focus from high-end housing preferred by investors to more affordable apartments that are still in demand by regular home buyers. Which is what the government wanted to happen.

Zhang Xinming said, ‘The ability of Chinese developers to get through the harsh winter is growing.’
Source: International Herald Tribune

According to China Central Television (CCTV) China’s central government will promote the healthy development of the nation’s capital market and maintain the stability of the country’s property sector to prevent possible financial risks.

At a central government meeting attended by President Hu Jintao, Premier Wen Jiabao, the central government vowed to take all possible measures to curb the country’s excessive inflation.

It allowed the country needs to improve its macro-economic controls and boost the production of necessities including grain, edible oil and meat.

Chiming in, the central bank said the country is to take effective measures to prevent prices from rising too rapidly and guard against big fluctuations in asset prices.

Now a slight internal contradiction.

The consumer price index climbed 7.7% year-on-year in May. While that was down from the 8.5% rise in April, it was still well above the government’s target.

This has affected the stock market. The Shanghai stock index fell 14% in a week as investors focused on rising global oil prices and tighter domestic monetary policy by the central bank.
Source: Forbes

The National Bureau of Statistics (NBS) reports China’s national real estate index was 104.07 in April, a decline of 0.65 point from March. But the index was up 1.42 points from a year earlier.

Still, it is slipping if not quite so quickly as to cast doom and despondency on all players.

The index for investment in property development was 104.28 in April, down 0.20 point from March but up 2.11 points from a year earlier. Slippage again.

About RMB695.2 billion ($99.3 billion) went into real estate development nationwide in the first four months of this year and that is up 32.1% year-on-year. Investment in housing construction increased by 35.2% to RMB494.4 billion, including RMB18.6 billion in low-income housing. That is up 24.7%.

The January-April period saw 80.65 million square meters of land developed nationwide by the real estate sector, up 5.9% on the same period of last year which is an increase but nothing like the massive increases we have seen in recent times past.

Between January and April, 1.79 billion square meters of real estate was being constructed nationwide, up 25.4% year-on-year.

So take a very short period and the tendency is either down or slightly up. The longer the period you use for examination the more bullish it appears. The shorter the period, the more bearish which is a word to indicate downwards. These are not panic figures. But they are not figures which will bring happiness and contenment to all real estate investors.
Source: China View