Industrial land prices and rents for industrial facilities will rise significantly in Shanghai over the next few years on robust demand from investors and occupiers. This according to  CB Richard Ellis, a leading real estate services firm.

Andrew Hatherley, executive director for Industrial and Logistics Services, CBRE China said that over the next four years, prices of the city’s industrial land are set to jump 55% while the rents for an average industrial facility are likely to gain 43% between 2008 and 2011.

Continued control over industrial land supply, coupled with a limited quota for new sites, led to a substantial jump in industrial land prices in the city in the first half of this year.

CBRE, in its latest market research report, said between January and June, the average industrial land price in Shanghai gained 28.2% to RMB1,304 ($190) per square meter,

The rent for an average facility climbed 16.9% to RMB38.8 a square meter a month in the same period.

The CBRE report said in the first six months of this year, industrial land prices in nearby cities jumped 67.4% from a year earlier while facility rents rose 25.2%.
Source: Shanghai Daily

The latest report of Ministry of Land and Resources shows the country’s arable land fell by 40,000 hectares last year to 122 million hectares.

Admittedly the rate that slowed somewhat.

The farmland decrease rate has dropped by 0.22 percentage point compared with that the year before last. During that same period, 13,400 hectares of farmland were prevented from being illegally occupied. Which suggest that some of the measures the central government has adopted to protect arable hand have paid off.

Note that efforts to reclaim or cultivate 196,000 hectares of farm fields from wasteland and fallow land skew the figures somewhat.

If you compare these figures with the 403,000 hectares of land which had been occupied for construction in 2006 much has been done in checking illegal occupation of farmland. But at the same time, the land gained for farming in 2007 was much less than the 367,000 hectares that had been reclaimed in 2006.

The central government has said repeatedly that we can never afford to have less than 120 million hectares of farmland, a bottom line that will basically guarantee the food security of a population as large as 1.3 billion.

China is now a net importer of rice. It would appear that the 120 million hectare figure will be breached this year.
Source: China Daily

The China Securities Regulatory Commission has stressed again that a real estate developer cannot use the fund-raising from its initial public offering to buy lands for real estate development as well as hoard land reserves and properties.

An executive at a property company that is seeking regulatory approval for an IPO said that if a real estate developer mentions such purpose in the IPO application, it will be refused.

Industry analysts said the result of this is listed real estate developers now need to pay more attention before they rush to buy land, which used to be a major driver to their share prices.

Zhang Yuliang, chairman of Greenland Construction said the reminder from the commission is substantially an encouragement to quality real estate developers that are expecting to list in the domestic A-share stock market. He said the restriction would not affect Greenland, the largest real estate developer in Shanghai.

However, an analyst at a consulting services provider in Shanghai, said the issuing of the reminder will impact the market sentiment to a certain extent. Some real estate developers will have to slow the IPO applications and rewrite their applications to meet the requirement.

And perhaps the issuance of the reminder signals a substantial change in CSRC’s attitude toward supervision on the domestic real estate industry and a change in appraisal standard for listed real estate developers, which used to be closely linked to their land reserves.

An UBS analyst earlier said the situation that investors last year chased by listed real estate developers with affluent land reserves will change in 2008. And the prediction was made that real estate developers in second- and third-tier cities would continue to seize land reserves.
Source: Trading Markets

Property prices are now showing signs of weakness in many of the country’s key markets. The Chinese government is on a high-profile campaign to clamp down on new bank loans, hoping to curb inflation.

News reports state that companies that leveraged big last year are now strapped for cash, unable to build on the land they have accumulated. Beijing pledged earlier this year to tax and seize hoarded land.

Ashley Howlett, a Beijing property lawyer with Jones Day who heads the firm’s greater-China construction practice said, ‘The swagger is gone.’

In recent months, he said, Chinese clients have been approaching him for ideas on alternative sources of funding, such as forming a private-equity joint venture with a global property fund or taking out a line of credit with a foreign bank.

The latest casualty of changed conditions: Guangzhou-based developer Evergrande Real Estate Group, which last week shelved an initial public offering it hoped would raise as much as $2.2 billion. Now it is looking to raise that money by different methods.

Evergrande wrote in its listing prospectus, ‘We are highly leveraged, and a deterioration of our cash-flow position could materially adversely affect our ability to service our indebtedness and to continue our operations.’

Soho China Ltd., a major commercial and residential developer in Beijing, recently dropped the idea of doing a domestic stock listing amid souring market conditions. Pan Shiyi, the company’s co-founder and chairman, told Shanghai Securities News that Chinese developers this year will ‘find themselves in extraordinarily difficult financial straits.’

In the past few months, Wang Shi, the head of megadeveloper China Vanke, a Shenzhen-listed company, surprised the market by slashing prices heavily on new flats and suggesting in a recent television interview that people wait three to four years before purchasing a new home.

Read the longish and depressing — if you are a real estate developer — news by clicking HERE.
Source: MyProps.org

The official Shanghai Securities News has reported the China Securities Regulatory Commission (CSRC) will reject IPO applications by property firms which intend to ‘hoard’ land with the proceeds. Hoard is a bit of an emotive word and perhaps store away land for future development would sound better but hoard is shorter.

Despite other media reports, an official from the CSRC says the commission is still reviewing IPO applications by property firms. The official said, ‘The CSRC will support bids by domestic property companies to grow stronger via IPOs or backdoor listings. We will only reject those IPO applications in which the proceeds are used in land and house hoarding.’

The question is whether there is a clear distinction between legitimate landbanking operations and ‘hoarding’ and whether the commission would recognize it as a reality or a piece of PR hype being bunged out to try and confuse the issue.

It looks as though muddying the waters is not going to work.

The report added that the prohibition applies to all land purchases using IPO proceeds.

The report said future land purchases must instead be funded with property companies’ internal resources.

Matthew Kong, analyst at Fitch Ratings, summed it up when he said, ‘Property developers cannot get money from the equity market and they can’t rely on bank lending. They can now rely only on sales and pre-sales if they want to generate enough cash to extend their land bank.’

To deter developers from sitting on idle land waiting for higher prices to launch projects, the government threatened confiscation of land that stays idle for more than two years. It also intends to impose a 20% non-use fee on land that is still idle one to two years beyond a project’s stated construction start date.

Matthew Kong said, ‘This move by the CSRC shows that the government still wants to control developers’ financing, expansion and land hoarding. It also reflects the prudent economic policies of the central government.’
Source: Forbes