Another indicator that the China property market is impossible to forecast is that the news that China’s spending on factories and real estate grew 25.6% through May led by property development and boosted by reconstruction work after snowstorms in January and February.

Urban fixed-asset investment rose to RMB4.03 trillion ($585 billion) in the first five months from a year earlier after gaining 25.7% in the four months through April.

Spending was more than the combined value of the economies of Thailand, Singapore and New Zealand.

Investment in real-estate development rose 31.9% in the first five months from a year earlier but compare with sending on non- ferrous metals which jumped 41.5% and on coal which surged 47%.

This is a situation which is impossible to call. It will be months before there is a clear picture
Source: Bloomberg

Glorious Property Holdings, a real estate developer in nine Chinese cities, may raise as much as $1.1 billion in a Hong Kong initial public offering, according to an e-mail sent to fund managers. But note that property IPOs are being canceled left, right and center so do not bet money on it going ahead.

The builder of apartments, townhouses, retail properties, offices and hotels is looking for sale of 2.25 billion shares, or a 30% stake. About 77% of that will be new shares sold by the company.

If successful, the sale could be the largest Hong Kong property IPO since the $1.9 billion offering by Soho China in September 2007, according to data compiled by Bloomberg.

At least three (my counting is five) property companies have delayed or canceled Hong Kong IPOs this year as stock markets slumped and on concern China’s government may curb the real estate industry so it happens when it happens.

Glorious Property has projects in Shanghai, Tianjin, Beijing, Wuxi, Suzhou, Nantong, Hefei, Shenyang and Harbin (seen in our illustration looking quite amazing during the annual ice festival) in eastern China. It has 15.9 million square meters (171 million square feet) of yet to be developed land in the country.

The company may begin taking orders from fund managers for the IPO in the next day or so. Stock trading is scheduled to start July 15. Deutsche Bank AG and JPMorgan Chase & Co. are managing the sale.

As an informed guess the writer believes that Glorious cannot, perhaps, get quite as much money as it wants/needs. So it will, possibly, settle for less.
Source: Bloomberg

This is the sort of situation that gives developers an attack of the vapors. They need to take two Aspirin and have a nice lie down before considering the implications.

On April 7, 2008, the State Administration of Taxation issued a circular governing provisional Corporate Income Tax payment issues for real estate developers , which is retrospectively (note that word for it gives one pause) effective from January 1, 2008.
It applies to the following enterprises:

(i) Chinese resident enterprises that are engaged in the real estate development business, including both domestic Chinese enterprises and foreign-invested enterprises; and
(ii) Those enterprises that make monthly or quarterly provisional CIT payments based on actual profits.

The provisional CIT payable is the result of multiplying such profit by the CIT rate (standard rate of 25% from January 1, 2008). That may be a little difficult to follow but take it that it does not make the life of a real estate developer any easier.

After the final completion of a project that has been pre-sold, the prepaid CIT will be reconciled with the actual CIT payable, based on the project’s actual profits.

In other words when you have made your profit the tax that can be demanded will be worked out.

For typical real estate projects, the profit rate shall be:

Not lower than 20%, for projects located in provincial capital cities as well as certain cities in special administrative regions and other designated cities.
Not lower than 15%, for projects located in second-tier cities.
Not lower than 10%, for projects located in other areas.
For low cost residential, the profit rate shall not be lower than 3%.

For real estate developers this does not bode well. Indeed, it bodes ill. Much, much more on this in a Mondaq special report which you can find by clicking HERE.
Source: Mondaq

Cityscape China 2008 opens today to investors and members of the global real estate community at the Shanghai New International Expo Center in Pudong. It will run from June 25 to 27, 2008.

Cityscape China 2008 features two conferences and a real estate awards event – World Architecture Congress China, the Cityscape China Investment Real Estate Investment and Development Conference, and the Cityscape China Real Estate Awards.

Organized by the Institute for International Research (IIR), Cityscape China 2008 is open to architects, designers, banks and financial institutions, property advisors, investment promotion agencies, project managers and directors, and municipal and regional government authorities.

Cityscape China 2008 provides international developers and investors access to China’s real estate market and global investment opportunities.

Meydan LLC, one of the key exhibitors at Cityscape China 2008, will highlight UAE’s incredible new horseracing development opening in 2010. Mr Saeed H Al -Tayer, Chairman of Meydan LLC , said:

‘Plans are underway to make this one of the best ever displays of Meydan’s evolving projects. Being one of Asia’s key real estate events, Cityscape China 2008 will be a perfect platform to attract major investors and real-estate stakeholders — Shanghai has over recent years become one of the leading hubs for East Asia.’

Key speakers at Cityscape China 2008 include real-estate, architecture and government specialists from China New Town Development Co., JP Morgan (China), Lab Architecture (Australia), LaSalle Investment Management (Hong Kong), BAZO Investments (China), International Urban Strategies (UAE), New City Investment Management (Shanghai) Company Ltd (China), Shui On Land (China), ING Real Estate (China), Grocon Pty. Ltd. (Australia), GE Real Estate (Hong Kong), Goodman Group (China), and Union Trust (China). Source: Cityscape China 2008

Seri Tanjung Pinang is on Malaysia’s west coast. The development on Penang island is still in its early stages but already offers a blend of landscaped parks, boulevards, seafront esplanades and a range of high-end homes. It is also has commercial and retail precincts.

The 240-acre first phase of Seri Tanjung Pinang — which, once fully completed in 2012 — will even feature a marina.

In each case E&O Property Development Berhad is looking to set new standards for luxury real estate in Malaysia.

K.C. Chong, E&O’s marketing and sales director, said ‘In the last ten years, interest in Malaysian property has taken off quite well. We have actually sold almost everything we have launched principally because we own waterfront developments right next to the city limits which are very attractive. Seri Tanjung Pinang has been particularly attractive to foreigners wanting to settle in this part of Asia.’

The company has relied on growing Asian wealth as the bedrock of its recent success. With this in mind, China is viewed as an increasingly attractive target market.

K.C. Chong, said, ‘China is at a stage where it is looking at outbound investment. We have done some studies that show the Chinese people want to buy abroad. We see some of them becoming second home owners, owning a property to just spend time there. Others will invest for capital appreciation.’

An exhibition of villas-by-the-sea will be launched at the Four Seasons Hotel Shanghai, June 28-29.
Source: Seri Tanjung Pinang