Business

The government’s decision to slash the minimum financial requirement for commercial property investment for the first time in 13 years, will help ease property developers’ capital strain and stabilize housing prices, analysts said.

The minimum amount of capital needed to jumpstart a new commercial property or an affordable housing project has been lowered from 35 percent of the total project cost to 20 percent, the State Council said in a statement on Wednesday.

The move was taken as a key adjustment in the government macroeconomic measure to buck the economic downturn and revitalize the ailing property market.

The last adjustment in this regard goes back five years, when the government raised the minimum capital requirement ratio to 35 percent to cool down the sizzling real estate market. At that time, Chinese commercial banks were not allowed to extend loans to real estate developers who have initial capital of less than 35 percent of the property project’s total investment.

Analysts said the current reduction of financial requirement indicated a lowered threshold for real estate developers to apply for bank loans.

The country’s real estate sector began to slow as the global financial crisis took a bigger than expected toll on the Chinese economy.

The momentum for real estate investment, a key driver of China’s domestic expansion contributing a quarter of the country’s total fixed assets investment (FAI), is quite weak by far, which is in stark contrast to the country’s galloping FAI growth this year.

In the first quarter, China’s real estate investment grew at a mild pace of 4.1 percent, reaching 488 billion yuan, down 28.2 percentage points from a year earlier, compared to the 28.6 percent FAI growth, or 2.36 trillion in value for the same period.

Analysts said the contrasting figures reflected sluggish private investment and the adjustment aims to boost real estate developer’s sentiment for new investments and help stabilize commercial property supply.

Liu Yuanchun, deputy head of school of economics at Renmin University of China, said real estate investments may start to pick up in the second half of this year thanks to government stimulus measures.

“The 15 percentage points reduction in financial requirement ratio is expected to release 300 billion yuan for investment in new property projects,” Liu said.

“The move will boost market vibrancy and increase property supply, and also help drag down property prices,” he added.

Home buyers, however, appear to hold a different view on the matter. According to a survey on Sina.com, the nation’s largest portal website, over 60 percent of the respondents believed the move will ease capital strain of real estate developers and propel property prices.

Nearly 50 percent of the respondents felt that the measures would help the property market recover.

(China Daily May 31, 2009)

China’s relaxation on the financial requirement ratio of commercial property investment will give an impetus to the country’s property market, Saturday’s China Daily reported.

The policy will help to ease property developers’ capital strain and stabilize housing prices, it said, citing analysts.

The State Council, the country’s cabinet, announced this week that, for the first time in 13 years, the minimum capital requirements for starting a new commercial property or an affordable housing project had been lowered from 35 percent of the total project cost to 20 percent.

The move was seen as a key adjustment in the government macroeconomic measure to fight the economic slowdown and revive the housing market, as the reduction indicated a lowered threshold for real estate developers to apply for bank loans, said analysts.

Liu Yuanchun, deputy head of school of economics at Renmin University of China, said real estate investments may start to recover in the second half of this year thanks to government’s stimulus measures.

“The 15 percentage points reduction in financial requirement ratio is expected to release 300 billion yuan (about 43.92 billion U.S.dollars) for investment in new property projects,” Liu said.

The move will boost market vibrancy and increase property supply, and also help drag down property prices, he added.

China’s real estate investment grew 4.1 percent to 488 billion yuan in the first quarter of this year. The figure was 28.2 percentage points lower from a year earlier.

The country’s fixed assets investment rose 28.6 percent, or 2.36 trillion yuan in value in the same period.

(Xinhua News Agency May 30, 2009)

The real estate market in Shanghai rallied in the first four months of this year as investment and sales rose.

A total of 41.94 billion yuan (US$6.14 billion) was invested in real estate development in the city between January and April, a year-on-year rise of 1.8 percent, the Shanghai Statistics Bureau said yesterday on its Website.

Although overall sentiment rose, there was a mixed performance by the different sectors. Investment in housing development fell 10.1 percent to 23.59 billion yuan and investment in office buildings jumped 10.2 percent to 5.58 billion yuan, the bureau said.

New property sales jumped 13.2 percent to 8.77 million square meters in Shanghai in the four months, the first year-on-year increase since December 2007. The bulk of the transactions was in new home sales, which jumped 21.4 percent from the same period a year earlier to 8.2 million square meters.

April, in particular, recorded the biggest jump when new home sales soared 77.8 percent to 2.77 million square meters while overall sales of new properties surged 65.5 percent to 2.91 million square meters across the city.

The central and local governments last year unveiled a series of boosting measures which include tax and fee cuts as well as favorable loan policies that helped trigger market demand, the bureau said. Property construction, however, slowed down during the period, the bureau pointed out.

Between January and April, a total of 7.04 million square meters of properties began construction in the city, an annual drop of 13.7 percent. In the same period, about 5.11 million square meters of properties were completed, a drop of 10.6 percent from the same period a year ago.

(Shanghai Daily May 27, 2009)

Demand for new houses in Shanghai continued to be robust last week, with the volume of area sold across the city hitting an 86-week high, but observers wonder if the growth can be sustained.

A total of 560,800 square meters of new homes, excluding those built for relocated residents, were sold in the city between May 18 and May 24, an increase of 15 percent from a week earlier, according to statistics released yesterday by E-House (China) Holdings Ltd.

“While new home transactions remained active over the past months, there has been actually growing concerns among industry players over whether the sales boom is sustainable,” said Xue Jianxiong, an E-House analyst.

Sales of new homes in Shanghai have been rising after the Spring Festival, with 787,600 square meters in February, 1.5 million square meters in March and 1.89 million square meters in April changing hands. By Sunday, May had seen sales exceeding 1.61 million square meters, according to research by Shanghai Uwin Real Estate Information Services Co.

“The volume of new home sales could possibly hit 2 million square meters this month if the strong sentiment can be maintained over the remaining days,” said Lu Qilin, a researcher at Shanghai Uwin. “And the robust buying demand would likely continue through June as the second quarter of the year has been usually the traditional peak season for home sales in Shanghai since 2005.”

Home sales usually fall in the summer due to the hot weather in July and August.

(Shanghai Daily May 26, 2009)

In April, nearly 29,000 second-hand flats changed hands in Shanghai, hitting a record high since 2006 for a single-month transaction in the city’s secondary market. But experts said the explosive trading volume resulted from several factors, and should not be seen as the signal of a broad rally.

Figures from housing consultancy E-house China show that 28,600 old flats were traded in Shanghai in April, up 11.3 percent month-on-month and up 101.4 percent over the same period in 2008. The average housing price stood at 11,674 yuan per sq m, up 4.3 percent from March, and gaining 993 yuan per sq m over 2008.

Latest statistics from the People’s Bank of China (PBOC)show that in April, personal housing loans from local banks increased 3.39 billion yuan, the highest monthly growth in 16 months. Among the increased loans, as much as 2.63 billion yuan goes towards secondary housing market, up 390 million yuan over March.

The remarkable increase in mortgage loans is a direct result of the burgeoning transactions in the housing market, said PBOC.

“The augmented trading volume came mostly from pent-up demand amid heightened fears of a global economic downturn since late last year,” said Chi Shengyu, analyst, Shanghai Existing Property Index Office (SEPIO).

According to Chi, the existing property price index is edging close to last September levels. “Apart from the increased demand, transaction of high-end properties, like Yanlord Town and Shimao Riverside Garden, which sell at 22,000 yuan per sq m and 30,000 yuan per sq m respectively, have directly pushed up the average prices,” said Chi.

Nearly 70 percent of the traded flats were bought by married youngsters, and those seeking better living conditions, said Huang Hetao, analyst, Century 21 China Shanghai. “Usually, transaction procedures in the secondary housing market take nearly one month to complete, so as early as March, buyers were coming back into the market,” Huang said.

“This could explain why we saw a 10 percent drop in trading volume in April, but the figures showed an opposite trend. The transaction decline will start to show in May,” said Huang.

Although Chi said buyers still have enough time to enter the market, he said the fundamental trend in Shanghai housing market has been improving. “Massive reconstruction and newly built infrastructure started since last October for the upcoming World Expo 2010. The construction boom will trickle down to the property market, too. The government’s tax cuts on house purchases and lowered mortgage rate for first home-buyers, will also help boost demand,” said Chi.

Statistics from China Real Estate Index System (CREIS) indicate that in April, a total of 24,065 new flats were sold, up 73.59 percent year-on-year, a record high since 2005, showing a similar trend.

To give further impetus to the realty market, the Nanhui District has been given the clearance to merge with the Pudong New Area, to create a super-size economic powerhouse. “In the short term, the property in and around Anhui will be in demand, but over the long term, housing prices will hinge on the location and the quality of property,” Chi said.

(China Daily May 15, 2009)

Home prices last month fell for a fifth straight month by 1.1 percent year on year in 70 Chinese medium and large cities, the National Development and Reform Commission said Tuesday.

By comparison, the prices dropped 1.3 percent in March, 1.2 percent in February, 0.9 percent in January and 0.4 percent in December.

In particular, the prices of new homes dropped an average 1.7 percent year on year while they edged up 0.3 percent from a month earlier. The prices of second-hand homes remained unchanged from a year earlier while they inched up 0.8 percent from March, according to the commission.

Investment in the real estate sector, meanwhile, continued to increase.

The National Bureau of Statistics yesterday said 729 billion yuan (US$87.8 billion) were invested in real estate in the first four months, a year-on-year growth of 4.9 percent. Investment in new housing development, excluding those designated for relocated residents due to urban redevelopment programs, rose 3.4 percent from a year earlier to 511.4 billion yuan.

The market saw a year-on-year drop of 15.6 percent when a total of 278 million square meters of homes started construction countrywide between January and last month. During the same period, 132 million square meters of new homes were completed, a rise of 27.1 percent from a year ago.

Land acquisitions, however, plunged 28.6 percent to 72.66 million square meters, the bureau said.

Nationwide, sales of new homes, excluding those meant for relocated residents, jumped 38.6 percent in the first four months while the volume of space rose 18.6 percent.

In Shanghai, the volume of new homes sold last month hit 1.89 million square meters, a month-on-month rise of 25 percent and an annualized surge of 97 percent, Shanghai Uwin Real Estate Information Services Co said.

A total of 28,600 units of used homes, or 2.38 million square meters, were sold in Shanghai last month, up 11 percent and 21 percent, respectively, from March.

(Shanghai Daily May 13, 2009)

China Vanke Corp, the country’s largest publicly listed developer, said sales jumped 22 percent from a year earlier to 5.27 billion yuan (US$771 million) last month.

The company sold a total of 595,000 square meters of houses nationwide in April, a year-on-year rise of 23 percent, Vanke said in a statement to the Shenzhen Stock Exchange yesterday. On a month-over-month basis, sales dropped 14 percent while volume of space sold fell 18 percent. During the first four months, Vanke’s sales rose 21 percent to 17.49 billion yuan from a year earlier.

(Shanghai Daily May 8, 2009)

Overseas residents in Beijing are once again showing keen interest in home buys, industry experts said.

Hu Hanxiang, manager, Star River, a high-end residential project in Chaoyang District, told China Daily that they have just sold an apartment valued at around 10 million yuan to a Taiwan resident.

“The enquiries for new homes from foreigners has increased along with the rebound in the property market,” said Hu.

Hu Yuzhou, manager, Yuanyang Lavie, a project in Beijing’s central villa district, said property sales to Hong Kong and Taiwan residents have gone up recently.

Isler, an Italian working with a joint-venture company, is one of the foreigners keen on buying a new residence this year.

“I believe the second half would be a good opportunity to make a purchase,” he said. “Buying property could be quite rewarding in the long run as there are not too many uncertainties,” he said.

According to Beijing Property Transactions Management, 18,533 apartments, with a total floor space of more than 2.1 million sq m, was sold in Beijing in April, compared with 15,034 apartments of about 1.7 million sq m floor space in March.

Eric Chan, a Hong Kong resident working at a property firm in Beijing, also has a similar viewpoint. He has also been seeking suitable opportunities ever since Beijing relaxed its curbs on foreigners buying new homes.

“I’ve been thinking of buying a new house in Beijing ever since I moved to the capital three years ago. The relaxation of the curbs offers me a good chance,” he said.

Chan is quite satisfied with an apartment near Beijing’s Chaoyang Park, but he would not rush to make a purchase for the time being. “The layout is perfect, but the price is still a bit high,” he said.

Though the average unit price of the project has dropped to 28,000 yuan per sq m from over 30,000 yuan per sq m in the second half of 2007, Chan believes a reasonable price should be around 25,000 yuan per sq m.

(China Daily May 6, 2009)

Sales of new homes jumped last month for the third consecutive month in Shanghai amid a continued robust demand from end-users.

A total of 1.89 million square meters of new houses, excluding those designated for relocation uses, were sold in the city last month, a month-on-month surge of 25 percent, or a year-on-year jump of 97 percent, according to statistics released yesterday by Shanghai Uwin Real Estate Information Services Co.

“Transaction volume of new homes has been maintaining a two-digit growth rate over the past three months, and the April figure already surpassed the monthly average of 1.73 million square meters recorded during the overheated (market in) 2007,” said Lu Qilin, deputy head of research at Uwin. “A market fever could possibly return if the volume continues to soar.”

Uwin research has found that end-users, instead of investors, remained the dominant force of home purchases in the local market.

Statistics showed that nearly 60 percent of new homes sold in the city last month were located between the Outer and Rural Ring roads, followed by 16 percent between the Middle and Outer Ring roads and 10 percent between the Inner and Middle Ring roads.

The supply of homes, meanwhile, fell to 1.15 million square meters last month from 1.25 million square meters in March, and average home prices rose 1.3 percent to 13,351 yuan (US$1,954) per square meter.

Analysts said the strong market momentum will certainly continue, at least over the next two months.

The two May Day holiday real estate fairs, which closed yesterday in the city, might be the latest indicators.

More than 170,000 people visited the Shanghai Exhibition Center for the four-day event whereas some 80,000 people did so last year, its organizers said yesterday. About 1.92 billion yuan worth of deals, including agreements of intention, were sealed during the fair which had some 200 exhibitors. Only 550 million yuan of deals were secured a year earlier.

Meanwhile, the smaller fair held in Pudong New Area saw 285 units of homes booked, organizers said.

(Shanghai Daily May 5, 2009)

Property sales in major Chinese cities saw strong rebound in April, a sign that the market was well on the way to recovery, analysts said.

According to data from China Real Estate Index, the country’s largest property research institution, 18,533 apartments, with a total floor space of 2,106,069 sq m, were sold in Beijing in April, compared with 15,034 apartments of 1,685,158 sq m floor space in March.

In Shanghai, apartment sales increased by 8 percent in April compared to the previous month.

Property transactions in Nanjing and Hangzhou also experienced an increase, but those in Shenzhen, Tianjin and Wuhan saw a minor drop.

The fear of inflation is gaining ground due to the government’s loosening monetary policy, and consumers think real estate is the perfect hedge against inflation, a DTZ report pointed out.

Grant Ji, Director, Savills (Beijing), said the big rebound in property sales during March and April this year was due to the accumulation of demand in 2008.

“As most people adopted a wait-and-watch attitude in 2008, their pent-up demand became evident in the first quarter, along with the falling price of real estate,” said Ji.

However, he did not think such a high volume of transactions would be sustainable in the second quarter.

“So far, I haven’t seen clear signs of a warm up in the purchase of property for improvement and investment,” Ji said.

In fact, the existing favorable policies, such as lower down-payment and mortgage interest rates, are all tailored to meet the requirements of property buying by individual families. The government still restricts the purchase of the second apartment.

The ongoing de-inventory, said Ji, was largely attributed to a more “reasonable” price after the market adjustment.

“As the economic fundamentals have not seen any big change at home and abroad, any big price hike will kill the rebound,” said Ji. “The property price will probably stabilize in the following two quarters, and the real recovery may come in the fourth quarter.”

Though China’s mass residential market is showing signs of a pick-up, foreign institutional investors remain quite cautious.

“After the financial crisis, most foreign investors placed risk control on top of the agenda. Their original ‘high-leverage’ mode does not work now,” said Ji.

(China Daily May 5, 2009)