China Property Market

[greengiraffe]

China property developer Shui On Land gives warning
DOW JONES AUGUST 14, 2014 11:15AM

Shanghai-based property developer Shui On Land said it expects its first-half earnings to fall by around 25 per cent compared with the same period a year earlier, becoming the latest in a string of developers to issue profit warnings amid a nationwide housing downturn in China.

The property firm, which is listed in Hong Kong, said the expected decrease in profit was partly due to a 7 per cent fall in gross profit margins from property sales, foreign-exchange losses due to a weaker yuan, and increased expenses from establishing an asset-management platform.

"The group is modifying its business strategies to better cope with the changing policy and market environment in China," the firm said in a stock-exchange announcement, adding that it "remains cautiously optimistic regarding its long-term performance."

The property firm said it expects strong sales from a residential project called Shanghai Rui Hong Xin Cheng from the second half of 2015. It also anticipates healthy income from rents as investment projects are completed in the coming year.

The profit warning follows similar moves by its peers, which are facing reduced profit margins and growing difficulty in borrowing. Chinese property developers also face mounting pressure to cut prices as housing inventory builds up. Shanghai Zendai Property Ltd., Greentown China Holdings Ltd., China Overseas Grand Oceans Group Ltd. and Greenland Hong Kong Holdings Ltd. have issued profit warnings in recent weeks.

Shui On Land is led by tycoon Vincent Lo, best known for developing Xintiandi, a popular restaurant and entertainment project in downtown Shanghai. The company is due to report its earnings by the end of August.

[greengiraffe]

China property hit with downgrade

Lisa Murray AFR correspondent
397 words
15 Aug 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.

Shanghai One of China's most high- profile property developers issued a substantial profit downgrade on Thursday after its sales more than halved last month, stoking fears that the real estate sector is damaging the country's growth prospects.

Shanghai-based Shui On Land became the latest in a string of developers to issue downgrades, warning its earnings would probably slide 25 per cent in the first half. The news comes just one day after China announced a plunge in new lending during July as banks, trust funds and other financing firms became more cautious.

Economic data released on Wednesday painted a grim picture for China's property sector. Residential property sales fell 17.9 per cent in July from a year ago, while developers' inventories of unsold properties went up. They are now 25 per cent higher than a year ago.

Capital Economics said while new housing starts rose, "this was probably a result of recent measures to support the building of affordable housing, rather than a more fundamental turnaround in developers' confidence".

Shui On Land revolutionised property development during the 1990s through its iconic makeover of an old run-down part of Shanghai. Xintiandi, which kept its traditional ­elements, is now one of the city's most popular ­dining, entertainment and ­residential districts.

The property sector has been one of China's biggest growth engines but over the past year has suffered from falling demand and a glut of supply.

So far, some 25 property developers have announced sales were down by an average of 35 per cent in July from the ­previous month.

Liu Yuan, property research director at Centaline, said smaller players who were overly aggressive at the start of the year had been hardest hit.

"This is a bad signal," he said. "July sales were much lower than expected."

However, he expects the downgrades will prompt the government to respond by further reducing property purchase restrictions and this may see sales improve before the end of the year. The property sector would also benefit from any interest rate cuts or changes to banks' capital requirements to ­encourage more lending.

Shui On Land, which is listed in Hong Kong, said in a statement it was "modifying its ­business strategies to better cope with the changing policy and market ­environment in China".


Fairfax Media Management Pty Limited

Document AFNR000020140814ea8f0001a

[greengiraffe]

China issues draft rules for property registry
DOW JONES AUGUST 18, 2014 10:00AM

China on Friday issued draft rules for a property-registration system, a step that would help the government track home-ownership. While the registry could be used in government investigations, the public would have limited access to it.

The property-registration system had been widely anticipated as a tool that would help discourage speculative home purchases. It is also seen as a step toward the rollout of a property tax, currently implemented only on a trial basis in the major Chinese cities of Shanghai and Chongqing.

In China, a lack of transparency in real-estate ownership has allowed corrupt officials and well-heeled property investors to amass large amounts of property, and concerns about confidentiality have hampered the progress of a national property registry.

The 10-page document, issued by the legislative affairs office of China's State Council, includes details regarding information sharing and protection, as well as recommendations to simplify the registration process.

The Ministry of Land and Resources, the Ministry of Public Security, and the tax and statistics bureaus are among the government departments that need to improve information sharing, the document said.

"The central government is telling the market that it is taking steps to prepare for the expansion of the property tax," said Johnson Hu, an analyst at CIMB Securities. "Ordinary people in China aren't used to the notion of paying property taxes and there needs to be a gradual introduction of this tax."

In the course of President Xi Jinping's anticorruption campaign, which has targeted bureaucrats' lavish spending, investigators have revealed that a number of corrupt officials owned multiple homes. But in a nod to privacy rights, the information on the registry wouldn't be public, according to the draft rules.

Interested parties, however, can apply to the registry for information, the draft rules said.

"During investigations, the departments and individuals are not allowed to use the information for other uses," the document said. "Without the consent of the property owner, they are not allowed to leak the information to the public," it added.

[greengiraffe]

Chinese officials rush to sell luxury homes amid corruption crackdown
DOW JONES AUGUST 18, 2014 10:00AM

China's corruption crackdown has already taken a bite out of the hospitality sector in China with its ban on lavish banquets and is now starting to make waves in another corner of the economy, as officials afraid of government scrutiny are dumping apartments.

In one case late last year, an Inner Mongolia political leader named Wu Zhizhong was convicted of corruption, accepting bribes and embezzling public funds. Investigators said Mr. Wu owned 33 properties in China and one house in Canada. Xinhua, China's official news agency, said the keys to all of his homes could fill up an entire handbag.

Cai Bin, a former Guangzhou official dubbed "Uncle House" on social media, was also convicted last year for accepting bribes. Investigators said he and his family owned more than 20 homes.

Those cases, and others like them, have raised alarm bells among local government leaders.

According to roughly a dozen property agents interviewed by The Wall Street Journal, officials are now afraid to buy luxury pads, and several are trying to offload properties that might raise red flags.

"Officials are focused on selling their homes quickly, so they are willing to sell at 5 per cent to 10 per cent cheaper than the average prices of comparable homes," says Zhang Yan, a manager at Shanghai Centaline Property Consultants, who says he sells three to four homes to officials every quarter on average. Party members usually find a buyer within two weeks, he said, while most other sellers find buyers in about a month, waiting for a higher price.

The impact of the corruption crackdown on the overall market is difficult to measure, in part because there is no national property registration system in China. While there are limitations on how many homes a person can buy, some people have relatives or surrogates purchase homes for them.

The dumping of properties is the latest iteration of fear that has spread through the Chinese government at all levels as President Xi Jinping's anticorruption campaign rolls on. Already, government officials have toned down lavish banquets, gift-giving and travel.

And it comes at a bad time for China's property market, which is facing a slump that many economists say poses the greatest risk to the country's economy. Housing sales in the first seven months this year fell 10.5 per cent, according to official data issued last week.

According to real-estate agents, government officials make up as much as 20 per cent of owners in the luxury housing market, and the agents say they simply aren't buying much anymore.

"A major way to corrupt an official is to give him a house as a gift," says Yan Jirong, a professor at the Peking University School of Government. "The anticorruption campaign is sending a signal" that such tactics should be stopped, he said.

Housing corruption is rampant in China. In June, the authorities in Guangxi Autonomous Region issued a statement warning civil servants "in possession of excess homes" to turn them in, though it left vague where and how to surrender such property.

The Central Military Committee, which controls China's armed forces, says it wants military personnel to annually declare the property they own, and has threatened to punish officers who hide or falsify their declarations.

In June, one government official offered a two million yuan (US$325,000) discount on his apartment in Beijing's downtown Chaoyang district, originally priced at 22.5 million yuan, according to the real-estate agent selling the home. An advertisement for the four-bedroom home was titled "Distressed sale!!!"

Mr. Zhang said he sold an apartment in Shanghai's high-end Gubei district for an official last year for around 11 million yuan. Comparable homes sold for at least 12 million yuan at that time, he said.

"It was a three-bedroom apartment in a good location, and the home he lived in was actually humbler," Mr. Zhang says. "He was exceedingly discreet."

According to a recent survey of investors and property developers in China conducted by the Urban Land Institute, a think tank, only 23 per cent of the respondents expected to invest more in luxury residential real estate, one of the lowest percentages recorded in the survey. That compares with 44 per cent who expect to increase their investment in the midmarket housing sector.

In Hangzhou, sales of high-end homes plunged 54 per cent in the first half the year, according to data tracker China Real Estate Index System. Gao Yuansheng, research director of the firm's Hangzhou office, attributed the fall mainly to expectations for slower price appreciation, but said it could be partly due to the anticorruption measures.

Another drag on the real-estate market: Beijing is paving the way for a nationwide system to tax and register property, which would make it much easier to identify modestly paid government officials who buy multiple homes. However, draft rules on a property-registration system issued Friday indicated the public would have only limited access to such a registry.

In a study from the University of Pennsylvania, economists found that Chinese government officials buy larger and more lavish homes than nonbureaucrats, despite earning typically 14 per cent less in monthly income. Some officials also receive a price discount of nearly 4 per cent, according to the study, which said that the size of the discount appears related to the power the official wields among local developers.

Bureaucrats in the study accounted for 7.1 per cent of buyers--a much higher percentage compared with the 0.86 per cent proportion of bureaucrats in China's total population.

Many officials mask their homeownership by using the IDs of their chauffeurs, relatives or surrogate buyers, according to real-estate agents.

One agent in Beijing said a client was in the process of unloading a home when the client was arrested last year. "I didn't realize he was an official until I saw his picture online when he was arrested," the agent said.

[greengiraffe]

Chinese property prices fall in July
DOW JONES NEWSWIRES AUGUST 18, 2014 12:46PM

The average price of new homes in 70 Chinese cities fell for the third straight month in July, as property developers continued to cut prices to reduce inventories amid the market downturn.

The average price of new homes in 70 cities slid 0.89 per cent in July from June, according to calculations by The Wall Street Journal, based on data released Monday by the National Bureau of Statistics.

This compares with a 0.47 per cent on-month fall in June and a 0.15 per cent fall in May, which was the first drop in two years.

On an annual basis, the average price in July rose 2.43 per cent, moderating from the 4.05 per cent increase recorded in June.

Real estate and construction are important drivers of growth in the Chinese economy, accounting for more than 20 per cent of gross domestic product in the world's second largest economy, when cement, steel, chemicals, furniture and other related industries are factored in, analysts estimate.

Excluding public housing, private sector home prices fell in 64 of the 70 cities in July, up from the 55 cities that posted declines in June. Home prices only rose in coastal Chinese city Xiamen and Dali, a city in southwest China, and were flat in the remaining four cities.

Housing sales have slipped this year, falling 10.5 per cent in the first seven months and analysts expect further price cuts as the local governments and property developers continue to grapple with a glut of apartments and tight credit environment. Some property developers have also issued profit warnings on their first half earnings in recent weeks.

In recent months, the local authorities in around 30 cities have also loosened property restrictions to lure buyers back into the market, but there has been little effect.

[BlueKelah]

Black Swan event gaining momentum.

Lots of officials must be shaking in their shoes at the thought of the new registry coming.

Downturn showing in Beijing and Shanghai, if a third of those empty ghost homes are owned by state officials and their family/workers, once panic selling sets in, it will be like USA 2008.

[greengiraffe]

Why worry about a closed market... better start worrying for smart alecs that thought they can better than local Chinese...

Black Swan event gaining momentum.

Lots of officials must be shaking in their shoes at the thought of the new registry coming.

Downturn showing in Beijing and Shangjai, if a third of those empty ghost homes are owned by state officials and their family/workers, once panic selling sets in, it will be like USA 2008.

[thor666]

Imo. I am just hazarding a guess that the china government can contain property prices.

On the other hand, the black swan may appear in a different manifestation. Whatever the china government policy to stabilize the china property market, may destabilize other parts of the china/global economic machine.

[Belg]

This seemingly Black Swan event is very much coinciding to the happenings in Australia - from GG's posts.

Could this be the fore-coming effect of the end of QE?

[Curiousparty]

Time to short and sell off property counters trading way above their book NAV (e.g. Wee Hur, Roxy Pacific, Oxley, etc)...