Chinese real estate

Xinhua Finance has published a report on ‘Credit Risks of China’s Real Estate Sector’ that identifies policy risk as the primary risk factor affecting the credit worthiness of the real estate industry.

The report discusses the status of China’s real estate developers, and examines both business and financial issues challenging the industry.

The report explains that China’s real estate sector has benefited from the nation’s strong economic growth and favorable government policy since the beginning of economic reforms.

But with the slowing of the economy and the tightening of credit, Xinhua Finance believes that the recent liquidity problems of the industry are the beginning of a process of unfolding credit risks.

These risks are associated with the nature of the industry and have accumulated over time.
Much, much more HERE.
Source: MarketWatch

The National Development and Reform Commission and the National Bureau of Statistics (NBS) reports that China’s urban property prices rose 10.1% in April from a year earlier, slightly lower than in March.

The average property prices in 70 large- and medium-sized cities dipped by 0.6 percentage point in April from a month earlier. Last year, property prices rose 7.6% year-on-year.

Carlby Xie, head of research at the Colliers International’s Beijing branch, a real estate services company said, ‘Based on our statistics of the middle- and high-end markets, the recent price trend remains stable. I would call it ’stagnant’ if we see the situation in terms of purchase price.’

Carlby Xie said people have remained reluctant to purchase houses, anticipating a price correction after the Olympic Games in August. And added, ‘The purchase sentiment could possibly rebound by the year-end.’

The NBS said urban fixed-assets investment rose 25.7% in the first four months year-on-year, compared with a 25.9% increase in the first quarter. Last year, the growth was 25.8%.

Song Yu and Liang Hong with Goldman Sachs in Hong Kong have calculated in a research note that investment in April was up 25.3% from a year earlier, compared with 27.3% in March.

They said the softening growth in April could have been distorted by the public holiday adjustments this year (the May Day ‘golden week’ has been replaced by three traditional holidays in April, June and September), which resulted in fewer working days in April of this year compared with last year.
Source: China Daily.com

Discounts and other incentives are being used to fight shrinking sales of property.

Vanke, the largest developer on the mainland by assets, announced an across-the-board discount of over 5% for 10 of its properties in Shanghai. It is the first time the company offered such a large discount in the city. Vanke is offering even better terms for cash buyers. A sales clerk at one of the company’s offices said those paying the full amount at once will get as much as an 8% discount.

Industry insiders said such a strong promotional offer by a major developer in the city indicates the market will continue to be bleak in the months to come.

Chen Sheng, director of China Real Estate Index System, said many other real estate developers may follow Vanke’s example by offering more discounts.

Shanghai-based Jing Rui Properties has also lowered its prices by offering a 3% discount for group purchases and a 2% discount for those recommended by previous buyers.
Hopson Development, a Hong Kong-listed real estate firm, picked out several apartments for sales promotion in Beijing, cutting down prices from RMB30,000 per sq m to RMB22,500 per sq m.
A project developed by Beijing-based Huayuan Real Estate is offering over 7% discount for those buying small apartments.
Coastal Greenland group, also a Hong Kong developer, reduced its prices for new projects in Beijing, lowering them by around RMB400 per sq m from the average of RMB17,000 per sq m.

Industry analysts said a number of large developers are trying to sell quickly and then take over other projects and smaller developers when the market dives. Some of them, however, are eager to sell off their projects to improve their annual reports.

Zhang Lei, a marketing professional with a developer that has several high-end projects going in Beijing, said, ‘Sales of high-end projects will face a big challenge this year as most buyers are investment-oriented.’
Source: China Daily

Property transactions can be quite complex and, indeed, at times quite baffling.

China Central Properties (CCP) is a property investment company quoted on the London Stock Exchange’s AIM Market which focuses primarily on medium to large partially completed projects in China.

CCP has a portfolio of properties, which include commercial, retail and residential complexes, in Guangzhou, Dalian, Qingdao, Beijing, Chengdu, Shenyang and Chongqing.

It also owns a company called Mountain Breeze (Barbados) SRL which, in turn, has a subsidiary company called Beijing ZhongTian HongYe Real Estate.

Beijing Zhongtian has entered into several agreements for the purchase of Beijing Huapu Centre.

Beijing Huapu Centre is located in Beijing’s prime Dongcheng District and consists of two office towers, each 24-storey high on a nine-storey podium. There are about 127,500 square metres of mixed office and retail space.

The estimated market value of Beijing Huapu Centre is approximately RMB 2.5 billion.

Now CCP is disposing of Mountain Breeze (which includes Beijing ZhongTian HongYe Real Estate) and CCP will record a gain on disposal of the project, before transaction costs, of about RMB300 million. CCP intends to use the sale proceeds to fund its acquisition of additional property projects.
Source: Hemscott

Hong Kong-listed Agile Property has bought four land sites at Huadu District in the southern Chinese city of Guangzhou for RMB920 million (US$124.2 million).

The total site area of the project is 283,000 square meters, with a gross floor area of 529,000 square meters, giving an average GFA (which stands for Gross Floor Area although why Reuters insists on using obscure acronyms wonders me) cost of RMB1,740 per square meter, which it said was competitive in the market.

Agile plans to develop the land into a community with schools and commercial facilities.

The land is in a prime location, with convenient facilities and good transport connections.

Meanwhile, Shui On Land has won a bid for a plot of land in China’s southern city of Foshan for RMB7.5 billion ($$1.02 billion) for redevelopment.

The land covers an area of about 639,320 square meters and will be redeveloped into a comprehensive mixed-use community with office, retail, hotel and cultural facilities and residential properties.