Business

Shanghai yesterday revised the criteria for housing so more first-time home buyers can enjoy preferential mortgage policies to boost the local property market.

A flat in the city’s Inner Ring Road with a total price of less than 2.45 million yuan (US$358,293) will be defined as normal housing if its floor space is smaller than 140 square meters, the Shanghai government said in a statement.

For a normal apartment sitting between the Inner Ring Road and the Outer Ring Road, the price cap will be 1.4 million yuan while that outside the Outer Ring Road will have a price limit of 980,000 yuan.

All so-called normal apartments should be smaller than 140 square meters each, the statement said.

First-time buyers of normal apartments will have their minimum downpayment cut to 20 percent from 30 percent and the floor mortgage rates will be lowered to 70 percent of the central bank’s benchmark rate, down from 85 percent.

“The move is aimed at encouraging households to purchase apartments, especially smaller ones to achieve reasonable transaction prices,” the statement said, noting the criteria would take effect today.

The city last unveiled definitions of normal housing in 2005. Instead of using the total price of an apartment as a yardstick, it used the price per square meter to gauge whether housing costs were considered normal.

Under the thresholds in 2005, a normal apartment within the Inner Ring Road was defined as one that cost less than 17,500 yuan per square meter and was smaller than 140 square meters.

Although the total price limits were unchanged from 2005 in all three categories, using the total price as a yardstick would make smaller apartments with high prices per square meter still be subject to preferential loan policies, analysts said.

For example, for an apartment within the Inner Ring Road that has a floor space of 100 square meters, the previous price limit was 17,500 yuan per square meter. Under the new rules, the cap price will be 2.45 million yuan in total, or 24,500 yuan a square meter.

“The new criteria will benefit purchasers of smaller apartments, said Cong Cheng, an official with the Shanghai Provident Fund Management Center.

First-time buyers of normal apartments can also have the interest rates on loans of varying maturities taken from the city’s public housing fund slashed by 27 basis points. The upper limit for local household mortgage loans from the public housing fund will also be raised to 800,000 yuan from 600,000 yuan.

Shanghai’s new policies are the implementation of China’s stimulus package for the property market, which was unveiled last month.

Although Shanghai’s housing prices have been rising in the past few years, they have shown signs of declining in recent months.

The average property price in Shanghai posted a month-on-month drop of 0.7 percent last month, compared with a 0.1 percent drop in the average price of 70 major cities in China, the National Development and Reform Commission said.

(Shanghai Daily November 1, 2008)

Many emerging markets improved their levels of real estate transparency over the past two years, with China achieving the greatest improvement in the Asia-Pacific region, according to a report by Jones Lang LaSalle, a professional services firm specializing in real estate.

According to the latest China edition of the Global Real Estate Transparency Index from Jones Lang LaSalle and LaSalle Investment Management, its global real estate investment management subsidiary, China is currently classified as a semi-transparent market, moving up one full level from low transparency.

“The successful staging of the 2008 Olympic Games has shifted the focus of investors from around the world not only onto Beijing but indeed China as a whole,” said Denis Ma, head of the research department of Jones Lang LaSalle Beijing, adding that the index serves as an excellent tool for potential first-time investors in China’s real estate market.

In addition to the differences between the three tiers of cities on the mainland, Hong Kong is one of the world’s most transparent real estate markets, Taiwan has a slightly higher level of semi-transparency and Macao has low transparency below mainland first-tier cities but slightly higher than second- and third-tier cities.

“China’s property markets are as diverse as the country itself. The inclusion of China’s second- and third-tier cities in this year’s survey helps users of the index better understand their different challenges,” Ma added.

This is the first China edition of the index and it highlights the key findings of the 2008 transparency survey in relation to China’s different tiers of cities. Previous China ratings reflected only first-tier cities (constant since 1999), so the marked improvement is significant for China, which has moved to a higher level than India for the first time.

Based on the findings, the report said there are four key reasons for China’s improvement:

1) Globalization, a major force behind real estate transparency, with increasing capital and companies in China expediting the requirement for accurate market information and adoption of global practices;

2)Openness of real estate’s direct correlation to the growing volume of investment transactions;

3)Increasing number of public listings by property developers and more market information through annual reports; and

4)Central government policies and more publicly available information through the China Real Estate Intelligence Services (CREIS).

“The steady improvements in China’s transparency level reflect not only the emerging maturity of the country’s real estate markets but also the government’s commitment to opening up the markets to overseas investors,” said Julien Zhang, deputy managing director of Jones Lang LaSalle Beijing.

Of the six areas used to determine market transparency, China improved most in the regulatory and legal field and had the lowest score in market fundamentals. These two areas showed the greatest variance between the different tiers of cities.

“We are confident about China and anticipate further transparency improvements in its real estate market over the coming years, primarily in terms of market fundamentals, regulations and legal issues. By 2010, we project the transparency score will move from 3.3 to 3.1 or 2.7, putting China at the upper end of the semi-transparent category and on a par with current transparency levels in Russia and Brazil,” said Ma.

China’s improved transparency, together with the ongoing market correction, seems to make the country’s property sector more attractive for investors.

Contracted investment in the real estate sector in Shanghai accounted for 27 percent of all foreign direct investment in the first half, double the same period last year, according to the latest report from the city’s statistics bureau report.

“In fact, the number of investors hasn’t changed much. The higher transaction volume is mainly due to more attractive prices in this fluctuating market,” said Eric Chan, deputy managing director of the Beijing branch of Savills, a UK real estate service provider.

Property price growth in China’s 70 major cities has dropped for six months in a row, with shrinking transactions and tightened monetary policy putting pressure on property developers’ cash flow.

Industry insiders said Morgan Stanley is raising US$10 billion for a global property fund and plans to put US$1.5 billion or more of that into China, despite fears the nation’s property market will slide further.

Other foreign funds, including Blackstone and Carlyle, are also looking for new investment opportunities in high-end residential and commercial properties in China.

(China Daily October 31, 2008)

China’s largest real estate developer by market value, Vanke, has reported third-quarter profit down by 13.4 percent from the same period last year due to a slowing housing market.

The Shenzhen-listed company said it would be impossible to reach its annual target of a 15-percent net profit rise from 2007’s 4.84 billion yuan (US$708 million). The third-quarter profit of 2008 was 215 million yuan. Property sales revenue shrank 31.9 percent from July to September, according to a company statement posted on the Shenzhen Stock Exchange on Monday night.

The company’s second quarter profit was 134 million yuan.

The economic and financial environment, and drastic changes in economic outlook and confidence in future incomes complicated China’s housing market, leading to falling prices and sales, the report said.

Although Vanke’s sales were better than market expectations, it could not escape the impact of the market slowdown.

The company has slashed its new home construction plans by 16 percent to 5.7 million square meters in floor space, said the statement.

Vanke shares lost 1.53 percent to close at 5.79 yuan on Tuesday.

The government cut mortgage rates by 0.27 percentage points, scrapped stamp tax on home purchases, and lowered the minimum down-payment from 30 to 20 percent for first time buyers on Oct. 22 to boost the ailing property market.

The adjustment was made to offset the impact of the global financial crisis and to stimulate domestic consumption, according to the People’s Bank of China.

The stability of the property sector is significant for the national economy as it accounts for a quarter of domestic fixed asset investment which grew 27 percent in the first three quarters.

China’s GDP slowed to nine percent in the third quarter as the spreading credit crisis sapped foreign demand for Chinese goods. GDP for the first three quarters slowed to 9.9 percent, the first single-digit expansion since 2002.

(Xinhua News Agency October 28, 2008)

China announced late on Wednesday an array of policies, including tax exemption and mortgage deposits reduction, to boost the falling real estate sector amid the global economic downturn.

The People’s Bank of China, the central bank, said in a website circular late on Wednesday that the down payment for an initial purchase of housing with a floor space of no more than 90 square meters for self use could not be less than 20 percent. Previously, the figure was 30 percent.

The new practice will take effect Oct. 27.

The interest rates on a mortgage for first time home buyers would be cut by 0.27 percentage points to boost domestic consumption. The floor for interest rates would be lowered to 70 percent of the central bank’s benchmark rate, the central bank said.

It said the adjustment was made to offset the negative impact brought about by the widespread global financial crisis and to stimulate domestic consumption amid the world economic slowdown.

Chinese people’s tendency to buy houses tumbled to 10-year low.

The new policy demonstrated the central government’s determination to stabilize the property market and to maintain economic growth, said Hua Wei, a professor with the Shanghai-based Fudan University.

The tax incentive can not be deemed as only to stimulate the sector of real estate, it is also part of the macro economic policy adjustment, according to Bai Jingming, deputy director of the Fiscal Science Research Institute of the Ministry of Finance.

China’s economic growth slowed down to 9.9 percent in the first three quarters as the spreading credit crisis dampened foreign demand for Chinese goods.

The stability of the property sector is significant for the national economy as the sector contributes a quarter of domestic fixed asset investment.

The sector, once overheated, plunged into recession as the government had limited bank loans for property developers in a move to restrain the runaway housing prices.

Property prices in major Chinese cities increased 3.5 percent in September from a year ago, the slowest pace in more than three years.

People’s tendency to buy houses tumbled to 10-year low. Insiders said the hefty transaction costs did not restrain the property speculative activities, but refrain consumers from buying.

To facilitate house purchase for mid-and-low income families, the Ministry of Finance said that starting from Nov. 1, the stamp tax on property purchase and the value-added tax of land on property sales would be lifted. The contract tax would be reduced to 1 percent on purchase of the first unit of housing with a floor space of no more than 90 square meters.

The fiscal measures were unveiled shortly after the interest rate cuts, which showed the government’s resolution to sort out the current problem, Hua said.

Bai Jingming said the new policy would be coordinated with the loosening monetary policy to help stabilize the property market and the national economy.

The ministry said the construction of the low-rental housing would be accelerated and the subsidies for low-income families would be boosted. Living allowance for the people affected by the Sichuan earthquake would also be increased.

Those moves aimed to ensure the basic living of the low-income households and raise people’s expectation for the economy. It also intended to promote the healthy and stable development of the economy by fueling domestic consumption, the ministry said on its website.

China has cut interest rates twice in one month, and loosened the lending restrictions to prevent the world’s fourth largest economy from sliding.

It also raised the export rebates to boost export, which is the driving force of the national economy, as the trade surplus shrank 2.6 percent in the first three quarters from a year ago sapped by weakening foreign demand.

(Xinhua News Agency October 23, 2008)

China saw average properties price in 70 major cities up 3.5 percent year-on-year but down 0.1 percent month-on-month in September, according to data released Wednesday by National Development and Reform Commission and National Bureau of Statistics.

The year-on-year increase rate was 1.8 percentage points lower than the August level.

Last month, housing for low-income earners in the major cities was priced 1.3 percent higher than the same month of last year, or 0.1 percent higher than August. Prices of common commercial housing and luxury housing went up 3.9 percent and 5.5 percent, respectively, over the year-earlier level. But the prices were 0.4 percent and 0.3 percent, respectively, lower than August level.

New housing was priced 3.9 percent higher year-on-year, but 0.3 percent lower month-on-month. The rise rate was 2.3 percentage points slower.

In the second quarter, average properties price in the 70 cities gained 9.2 percent on the same period of last year, as against the 11-percent rate for the first quarter.

(Xinhua News Agency October 22, 2008)

Real estate stocks jumped yesterday on news that China will cut transaction fees for home sales to spur buyers but experts are doubtful that the policy can reverse the declining trend in the market.

China’s State Council announced on Sunday measures to maintain economic growth in the fourth quarter in the face of a global financial crisis, including cutting transaction fees to promote home sales.

“It is the first time since 2003 that the central government has changed its attitude from restricting development of the real estate market to boosting it,” said Yin Zi, an analyst at Shenyin & Wanguo Securities Co.

“China’s exports faced a bigger pressure when the global economy turned sluggish, so the government hoped that boosting the real estate sector can stimulate consumption to balance weaker exports and keep the economy growing,” Yin said.

But the policy can only prevent a sharp fall in housing prices in the short term rather than change the downward trend, Yin pointed out.

The move is in line with provincial governments’ efforts to revive the market. Shanghai has raised the ceiling of mortgage lending in the city’s housing fund program by as much as 20 percent for some households. These families can get a maximum loan of 600,000 yuan, up from 500,000 yuan, for their first private property.

The central government is expected to issue more policies such as easing conditions for a mortgage for a second home, lowering loan interest and reducing the down payment.

Housing prices in the country’s 70 big and middle-sized cities rose 8.5 percent in the first three quarters of this year, the National Bureau of Statistics said yesterday.

The average price for September rose 3.5 percent, compared with 5.3 percent in August, the bureau said.

“It’s too early for the government to stimulate the real estate market, which may form a bubble and increase risks for financial firms,” said analyst An Yun at Shenyin & Wanguo.

(Shanghai Daily October 21, 2008)

The central government is closely monitoring the property market after 18 cities including Shanghai launched various measures to arrest falling property sales, a senior official said yesterday.

Speaking on the sidelines of a press conference in Beijing, Du Ying, vice-minister of the National Development and Reform Commission (NDRC), said: “Real estate is a major sector in our fixed-asset investment, so the government is closely watching its development.”

His comments came after the Shanghai municipal government raised by one fifth the mortgage ceiling of the housing accumulation fund, into which employees deposit money every month in return for lower interest rates. The measure took effect on Wednesday.

“New measures by other cities are exciting news for us,” Shanghai vice-mayor Yang Xiong said at the same press conference.

“We will continue to study necessary and controllable policies based on changes in the economy and property market. We aim to keep the property market stable.”

Rescue policies aiding the real estate market have been announced in 18 cities.

Favorable offers include raising government funding for homebuyers and extending the time limit for developers to use their acquired land.

The country’s property market began to cool in the fourth quarter of last year, with transactions remaining low.

But analysts are reserved on what these moves mean.

Qin Xiaomei, research chief at CB Richard Ellis’ Beijing branch, said: “It’s hard to say that now is the time the government has to save the real estate market, as there is still room for property prices to fall.”

Although property prices in most cities have fallen month-on-month recently, the year-on-year indexes are still going up, Qin said.

According to figures from the NDRC, prices in 70 major cities have climbed 5.3 percent year-on-year, but the growth rate was 1.7 percentage points lower than that for July.

“Meanwhile, developers who grabbed land parcels in 2005 or 2006 are still enjoying good profit margins despite the current price drop. And they should now cut prices to meet consumers’ wallets,” Qin said.

Many buyers, however, are waiting for prices to fall.

Yin Lijin, a resident of Shanghai’s Pudong new district, where the average monthly salary is about 6,000 yuan, said yesterday: “Apartments in my favorite areas still cost more than 20,000 yuan (US$2,900) per sq m.

“I’ll have to wait until they fall to about 10,000 yuan.”

Qian Wei, who together with her fiance in Beijing’s Haidan district make 15,000 yuan a month, said: “Friends who are familiar with the market told us the price may be lower early next year.”

But agents have disagreed.

“Secondhand apartments haven’t dropped much. Owners still want high bids,” a salesperson with real estate broker 5i5j said.

(China Daily October 17, 2008)

Following the examples of Nanjing, Changsha, Suqian, Shenyang, Xiamen and Xi’an, Shanghai and Hangzhou in east China have now implemented measures to lift the gloom over local real estate markets.

On October 14, Shanghai Provident Fund Management Center released a Notice on Raising the Upper Limit of Housing Provident Fund Loans. Accordingly, households consisting of two or more solvent borrowers can use their housing provident funds to borrow up to 600,000 yuan (about US$88,000) instead of 500,000 yuan (about US$73,000), for their first house purchase. Households with a single borrower will not benefit from the change.

The same day, Hangzhou, the capital city of Zhejiang Province, published the government’s Opinions about Enhancing the Healthy and Stable Development of Real Estate Market. This move adds several districts to a list of local areas where people are given local permanent residence permits after buying standard-value homes. It also stipulates that buyers of new houses or second-hand houses will be granted tax subsidies.

Meanwhile, the local authorities of Hangzhou eased restrictions on real estate developers by lowering the rate of advance tax, adjusting the term of payment for land transactions, and relaxing restrictions on the duration of construction, among a broad range of measures.

A developer told Shanghai Securities News that the government’s move relieves the pressure on capital turnover for real estate companies at a time when borrowing from banks is difficult and expensive.

Zhao Hangsheng, director of Zhejiang University’s Institute of Real Estate Investment Studies, said the time is right for government agencies to take action to revitalize the market, but the outcome will remain uncertain as a result of the on-going global financial crisis. And the authorities need to do still more, Mr. Zhao pointed out. He expressed his hope for more effective rescue plans from higher authorities.

According to relevant statistics, there were only 17,303 apartments sold in Hangzhou from January to September this year, down 46 percent compared with the same period last year. The weak market is a cause for concern. Reportedly, government officials held talks with several big local developers before issuing the order.

(China.org.cn by Pang Li, October 16, 2008)

China’s housing market will continue to slow this year, but analysts say new government incentives on the horizon should spark a rebound.

The measures include possible tax and interest rate reductions and more-liberal lending practices.

Analysts said the efforts are needed to help developers who are facing severe capital pressure as a result of bank credit controls designed to fight inflation.

Potential home buyers, meanwhile, have been sitting on the sidelines waiting for the market to hit bottom.

“It was not a good year for China’s real estate industry,” said Yin Zi, an analyst who works for Shenyin & Wanguo Securities Co.

China’s residential property sales fell 13 percent year on year during the first eight months of 2008, and in August alone sales plummeted 42 percent from a year earlier.

But Li Shaoming, an analyst at China Jianyin Investment Securities Co, believes the contraction in property deals does not indicate an underlying weakness.

“People are just postponing their purchases,” Li said. “The demand will hardly subside as so many people in China need to buy a home.”

One major ray of hope for property developers is that the government has taken a clear position on boosting the real estate sector.

On October 8, the central bank cut interest rates and reserve requirements for commercial banks to expand market liquidity and stimulate economic growth. It was the second 0.27-percentage-point reduction in a month. The earlier cut, on September 15, was the first rate reduction since 2002.

With the support of the central government, local authorities have introduced a series of rescue measures.

Shanghai yesterday raised the mortgage ceiling by as much as 20 percent for some households that participate in the public housing fund, a government program that provides reduced interest rates.

In July in Hunan Province’s Changsha, the city government cut the down payment for the purchase of a first home from 30 percent to 20 percent, and the mortgage period was raised from 20 years to 30 years.

In Shenyang in Liaoning Province, the government cut in half the property deed tax to encourage sales.

In Nanjing, capital of Jiangsu Province, buyers were guaranteed direct subsidies for home purchases.

Industry sources said the biggest hope for a market recovery is their expectation that more government stimulus measures will be issued by the end of the year.

Yin of Shenyin & Wanguo expects the new policies to include the removal of restrictions on the purchase of a second property by an individual, further reductions in the deed tax and looser lending rules for developers.

Wang Qing, a Morgan Stanley economist, said the stringent mortgage lending rules may be eased and mortgage interest rates may be lowered further.

(Shanghai Daily October 16, 2008)

United States private-equity firm Blackstone Group LP dropped a 1.1-billion-yuan (US$161-million) Shanghai property purchase amid the global financial crisis and China’s real-estate price slump, South China Morning Post has reported.

Blackstone scrapped the planned purchase of a 90-percent stake in the Changshou Commercial Plaza, the Hong Kong-based, English-language newspaper said, quoting unidentified people. The plaza consisted of two towers with a six-level shopping center and commercial complex in one, Bloomberg News reported.

Blackstone, which agreed to buy the stake from VXL Capital Ltd four months ago at almost twice the 586 million yuan the Hong Kong-listed company paid for it in March 2006, had planned to use it as a springboard to more China real-estate investments.

It scrapped the agreement after the global financial crisis dimmed the economic outlook and mainland Chinese property prices continued to slide, the newspaper said.

Blackstone was reported in August to have agreed to buy Skymall, a new shopping center in Shanghai, for more than 4.5 billion yuan from Chinese developer Super Ocean Group. The two sides had yet to reach a compromise on pricing, the SCMP said yesterday.

(Shanghai Daily October 14, 2008)