China Property Market

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#1
Blackstone favors industrial realty

By Cai Xiao (China Daily)Updated: 2014-07-11

Selective options to help PE giant tap investment opportunities in sectors like mobile Internet

Global alternative asset manager Blackstone Group LP likes commercial and industrial real estate in China and regards residential property as less interesting, its chairman and CEO told China Daily on Thursday.

"Industrial warehouses in China are very interesting, and are set to benefit as Internet and retail sales increase," said Stephen Schwarzman. "So are office buildings and shopping centers."

Schwarzman, in Beijing to attend the fifth annual US-China Consultation on People-to-People Exchange, said Chinese residential real estate has the potential for volatility and regards it as "the least interesting in the nation's real estate sector".

He added that real estate markets vary across China. "The imbalance of China's real estate among different classes and regions is interesting," said Schwarzman.

A decrease in value of some real estate assets and the shortage of credit from banks have created opportunities for Blackstone to purchase good assets from developers and other sellers.

Schwarzman said his company specializes in buying very large properties, as liquidity and capital can be difficult for some competitors, but these conditions provide a terrific advantage for Blackstone to buy at favorable prices.

"The long-term prospects for the Chinese real estate market are quite good, but it's normal in a certain period of time for the value of some properties to go down and at some time later to become stable again," he said.

Schwarzman said China is still growing very quickly compared with most other countries, and mentioned that some people seem overly concerned about China's growth.

"The perception of China's slowing economy can keep other investors away, and we look at the same situation and think that's an opportunity," he said.


Schwarzman said that if a country undergoes economic reforms, many business opportunities will be generated, and so it goes in China.

He said that his company has just finished a deal in China's healthcare sector but declined to release the name.

Blackstone Group LP, with Chinese technology consulting and outsourcing firm Pactera's CEO and other managers, took that company private last October in a deal in which Blackstone paid $539 million.

"There are many good opportunities in China, and you have to be selective," Schwarzman said. "For instance, the mobile Internet brings revolutionary changes to the world, and the situation is more obvious in China".

By March 31, Blackstone had $272 billion in assets under management, and its net profit in 2013 totaled $3.5 billion.

Blackstone Group acquired Hong Kong-listed Tysan Holdings on Jan 3, paying HK$1.64 billion ($211.5 million) for 65.5 percent of the shares. It increased its shares in the property developer on Jan 7-8 to 71 percent.

In addition, Blackstone purchased 40 percent of Szitic Commercial Property Co Ltd, one of China's largest shopping mall developers and operators, SCP said in November.

To cope with China's growth surge, as much as $2.5 trillion may need to be spent on land and warehouses over the next 15 years.

According to Jeff Schwartz, co-founder of Global Logistic Properties Ltd, the biggest foreign builder of logistics facilities in China, "over the next 15 to 20 years, the real cost of building warehouses is going to be staggering."

That has drawn the attention of private equity firms like Blackstone Group and Carlyle Group LP as they seek to benefit from an anticipated investment boom.

http://www.chinadaily.com.cn/business/20...720164.htm
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Jinan opens doors to property buyers

By Mu Chen (chinadaily.com.cn)Updated: 2014-07-11

The eastern Chinese city of Jinan on Thursday became the latest region to lift home purchase restrictions, local media reported on Wednesday.

The change extends to both locals and outsiders, and marks the definitive end to the policy that has limited home purchases in the Jinan real estate market for over three years, according to Qilu evening newspaper

Locals and outsiders can now purchase properties in the provincial capital of Shandong regardless of how many homes they already own.

As part of the policy, locals with two homes or more, outsiders with one home or more, and those who could not provide proof of income tax or social security payment were prevented from buying homes in the city.

Earlier, Jinan City Construction Committee had announced on July 3 that it was investigating possible adjustments to the city's restrictive home purchasing policy in order to promote the healthy and steady development of Jinan's real estate market.

Over the past couple of months, more than 10 cities nationwide have lifted or eased bans on ownership of more than one home, imposed in early 2011 to cool the market. At that time, more than 40 cities made use of the limits along with other measures, including higher mortgage rates and bigger downpayments on second homes. Three years ago, high home prices were among the top complaints of urban residents.

Xu Chuanming, marketing director of Hopefluent Group Holdings Ltd (Shandong), said a cooling real estate market hurts economic growth and fiscal revenue.

"It's quite natural for local authorities to lift the limits to help the property market," said Xu.

The real estate sector has been a major driver of growth over the past decade. Revenues from land sales are a major source of income for local governments, accounting for about one third of total fiscal revenue. In some regions, the percentage can be above 50 percent.

This revenue slumped 15 percent in the second quarter of the year. In cities such as Beihai, Kunming, Hohhot and Ningbo, the decline is more than 50 percent.

Jinan exemplifies of the current housing market. Sales in terms of floor space in Jinan declined more than 30 percent in the January-May period and prices dipped 0.4 percent in May, the first month on month decline since June 2012. Nationwide, housing sales declined 9.2 percent year on year in the first five months, and half of 70 major cities reported month on month declines.

"Poor sales mean developers have taken a cautious approach to land purchases and falling revenue has driven governments to lift the restrictions," said You Fang, an analyst with WorldUnion Properties.

In the long run, China should continue to curb speculation in the housing market to let the economy avoid excessive dependence on the real estate sector, said Li Tiegang, head of the property research center at Shandong University.

Although many cities reported month on month declines in housing prices, those declines are small, said Li. "The authorities should tolerate some fluctuations in prices. They should not adjust policies for small ups and downs," he said.

Once the economy picks up, house prices could rebound, which will do no good for the long-term health of the property market, said Li.

After the scrapping of purchase limits, the government should impose a property tax in more regions to curb speculation and build more affordable housing, he said.

Xinhua contributed to this stroy.

http://www.chinadaily.com.cn/business/20...722545.htm
Research, research and research - Please do your own due diligence (DYODD) before you invest - Any reliance on my analysis is SOLELY at your own risk.
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#2
Realty heading for market consolidation
By Emma Dai in Hong Kong (China Daily)
2014-07-12

Strong demand, limited supply to offset chances of housing collapse, say analysts

The property market in China is likely to consolidate in the second half of the year, as strong demand and limited supplies will offset the chances of an imminent market collapse, market analysts said on Friday.

"We expect the property sector to see slower growth this year given that home prices and sales volume have fallen. However, the market will not collapse," said Raymond Ngai, head of China Property Research at Merrill Lynch (Asia Pacific) Ltd.

The financial services firm said average property prices in China will fall by 5 percent this year to about 10,291 yuan ($1,650) per square meter, while total sales volume will also see a 5 percent decline to 1.1 billion sq m by the end of the year.

Ngai indicated that sentiment is improving as the central government is applying differential policies. "Cities with high inventory rates will continue to release their own easing measures. Recently smaller cities have been more flexible in implementing Beijing's home purchase restrictions. The central government accepted such moves in order to let them, especially the small ones, digest their inventories," he said.

In the light of nationwide restriction on home purchasing, a dozen local governments have announced their own easing policies in various forms this year to encourage homebuyers.

Liu Shiyu, deputy governor of the People's Bank of China, also held a window guidance in May, ordering commercial banks to release mortgage loans to needy homebuyers.

"In other words, Beijing doesn't want to see a hard landing in the property sector," said Liao Qun, chief economist of China Citic Bank International Ltd in Hong Kong. "The central bank's move, the first in many years, indicates top policymakers' consensus that market adjustments should be mild.

"It's hard to say how long the adjustment will last. But if home prices stay flat for a year - not down, the bubble will shrink 10 percent or more. That's because household income is rising at the same time. The market will be much more stable through the consolidation. After all, buying real estate is still the top priority when people have money," Liao said.

Merrill Lynch's Ngai is even more optimistic. "We expect market sentiment to pick up in the second half," he said. "Sales volume is set to improve because developers will launch more new projects and offer even bigger discounts.

"On the supply side, new construction volume has come down and developers have be more conservative in land purchases. With price drops, we expect demand to pick up. The market is likely to find the balance again at the end of the year or early next year," he said.

Real estate investment has increased 15 percent this year, much slower compared with 2013. New construction volume also dropped by 19 percent for commodity housing and down by 22 percent for the residential sector.

Besides, Ngai stressed that demand for housing is solid in China. "People are not buying because currently the sentiment is not good. Potential buyers are waiting for further discounts. Major cities recorded 20 to 30 percent drops in sales volume in the first half. With demand piling up, we expect the pressure to ease in the second half on lower home prices and friendly policies."

According to Centaline Property's data, in six major mainland cities, the amount of enquiries to the real estate agency didn't drop this year compared with 2013. Meanwhile, though mortgages are said to be hard to acquire this year, Ngai said loan supply is at around the same level compared with last year, only at a higher interest rate.

He added that while the countries' urbanization rate is at 53 percent, the official plan is to boost the rate to 60 percent by end of the decade, which will generate a large amount of home seekers in cities.

Besides, a lot of residential properties in big cities were built before the housing reform in 1998. "They are in poor condition now. Many people are looking to upgrade their living standards when their incomes grow. Nationwide, affordability is improving, because overall household income growth has outpaced home price growth. The affordability is stretched only in first-tier cities."

http://www.chinadaily.com.cn/business/20...740187.htm
Research, research and research - Please do your own due diligence (DYODD) before you invest - Any reliance on my analysis is SOLELY at your own risk.
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#3
Property market in China is one of the hardest puzzles... and just like the saying don't fight the Fed, is it wise to fight the Central Party?

The stability of the country is tied to economic prosperity and the leadership knows it too. If the country were to go to a full scale depression like era in the US, civil discontent and unrest will be sure to rise significantly.
http://theasiareport.com - Reflections From Finding Value In Asia
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#4
(14-07-2014, 10:56 AM)theasiareport Wrote: Property market in China is one of the hardest puzzles... and just like the saying don't fight the Fed, is it wise to fight the Central Party?

The stability of the country is tied to economic prosperity and the leadership knows it too. If the country were to go to a full scale depression like era in the US, civil discontent and unrest will be sure to rise significantly.

One thing I learnt during my internship in China would be that news read have to be taken with a pinch of salt. Initially, when I just read the news, I felt that the property market bubble in China seems on the verge of popping etc. However, if you actually talk to the people on the 'ground', people who are really within the real estate market they would tell you otherwise.

That said, everyone is focusing their attention on the FTZ policy in Shanghai. The next few steps of the government would be determined on the success of that.
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#5
(14-07-2014, 11:39 AM)heifien91 Wrote:
(14-07-2014, 10:56 AM)theasiareport Wrote: Property market in China is one of the hardest puzzles... and just like the saying don't fight the Fed, is it wise to fight the Central Party?

The stability of the country is tied to economic prosperity and the leadership knows it too. If the country were to go to a full scale depression like era in the US, civil discontent and unrest will be sure to rise significantly.

One thing I learnt during my internship in China would be that news read have to be taken with a pinch of salt. Initially, when I just read the news, I felt that the property market bubble in China seems on the verge of popping etc. However, if you actually talk to the people on the 'ground', people who are really within the real estate market they would tell you otherwise.

That said, everyone is focusing their attention on the FTZ policy in Shanghai. The next few steps of the government would be determined on the success of that.

I do agree with your post, but one question.

Why FTZ policies have direct impact on China property market? Shanghai FTZ is an important test bed for financial market liberalization in China, but might has little direct impact on China property market...
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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#6
What does FTZ mean for real estate market ? By JLL
________________________________________________________________________________________________________________
Shanghai Pilot Free Trade Zone: a big positive for the office market

According Jones Lang LaSalle’s recent research ‘What does the FTZ mean for the real estate market?’

China’s State Council approved the country’s first free trade zone (FTZ) in July, followed by an official launch on 29th September. The FTZ, occupying 28.8 square kilometers, consists of four areas along Shanghai’s east coast, namely Waigaoqiao Free Trade Zone, Waigaoqiao Bonded Logistics Park, Pudong International Free Trade Zone and Yangshan Free Trade Port Area. The FTZ is much more than just free trading; it will serve as a test ground for China’s economic reforms, especially in the service sector. “While we see great promise and great potential in what the FTZ will mean for Shanghai and for China, the progress is likely to be slow and cautious for some time yet,” said Joe Zhou, Head of Research of Jones Lang LaSalle Eastern China. “With respect to real estate, we don’t think the FTZ results in the development of competing CBDs to Shanghai’s existing city centre. However, the FTZ will be a catalyst for financial reform and deregulation, which is a very important driver for office demand and will benefit the existing CBD in the medium to long term. ”

The new FTZ will have profound implications for office demand throughout Shanghai in the medium to long term. The official launch of the FTZ is a signal of the government’s continued commitment to moving forward with financial and service sector reform and to positioning Shanghai as a global financial centre. It is expected that the zone will allow for experimentation with pilot reforms in financial deregulation, RMB convertibility, and interest rate reform. This will benefit the whole city’s financial services industry and spur greater demand for downstream professional services which are traditionally located in the city’s existing CBDs. By utilizing a “negative list” approach rather than only allowing a specific set of industries towards foreign investment, the FTZ will also bring new sources of demand for office space from industries such as education and medical services.

The FTZ is a giant step forward for Shanghai to become a truly world city and global financial centre. However, the immediate impact of the FTZ will be limited to a near-term boost to office demand in the zone itself due to new business setup. There is not much possibility that any of the four areas that comprise the FTZ will become “new CBDs” over the medium to long term, for four main reasons.

• Firstly, in terms of location, all areas of the Shanghai FTZ are situated along the coastal edge of the city and are about 25-60 kilometres from the existing CBD. In addition, these zones are currently occupied in large part by warehouses, and lack a business environment, amenities, or infrastructure that could compete with downtown.

• Secondly, although the two constituent zones in Waigaoqiao are relatively close to downtown, both are largely built out and thus far no redevelopment plans have been released by the government.

• Thirdly, from a city planning perspective, the government does not intend to build a new financial or business centre in the new FTZ to compete with the existing Lujiazui CBD and emerging business clusters such as Qiantan. The likelihood that the FTZ will be expanded to the whole city after several years’ time means that building a new CBD in the pilot zone would ultimately be superfluous.

• Finally, companies that register to do business in the FTZ are not required to set up a physical office in the zone to conduct their trading or financial activities, meaning their existing offices downtown will suffice.

The prospects are somewhat better for the FTZ’s impact on the warehouse sector, particularly for bonded space, which is already located in large part within the FTZ’s boundaries. In addition to promoting financial reforms, the FTZ also explicitly aims to enhance Shanghai’s role as a shipping and logistics hub. It is expected that customs policies and other trade regulations in the FTZ will be streamlined to make Shanghai more competitive with existing Asian trading centers like Hong Kong and Singapore. Anticipation for the FTZ has already sparked a wave of interest in Shanghai’s bonded warehouses, with inquiries up and optimistic landlords raising rents. Whether this new activity becomes a trend will depend on the speed and scope with which the FTZ’s trade-oriented policies are enacted.

As for the retail market, we do not expect the FTZ to become a major shopping destination. At this stage there is no indication that a special tax regime will be in place to enable duty-free shopping or duty-free outlets. While preliminary reports do suggest that select e-commerce sites will partner with the zone, this does not extend to any particular tax benefit. We do see opportunities however to invigorate sales of imported items if any tax reductions are granted in the future.

http://www.joneslanglasalle.kz/Pages/New...emID=29598
Research, research and research - Please do your own due diligence (DYODD) before you invest - Any reliance on my analysis is SOLELY at your own risk.
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#7
(14-07-2014, 06:24 PM)Boon Wrote: What does FTZ mean for real estate market ? By JLL

Shanghai Pilot Free Trade Zone: a big positive for the office market

I assume the context of the discussion is on residential property, and on national level in China. Big Grin

It is not difficult to understand that the FTZ does has impact on local property market, not only commercial, but residential market as well.
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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#8
(14-07-2014, 03:39 PM)CityFarmer Wrote:
(14-07-2014, 11:39 AM)heifien91 Wrote:
(14-07-2014, 10:56 AM)theasiareport Wrote: Property market in China is one of the hardest puzzles... and just like the saying don't fight the Fed, is it wise to fight the Central Party?

The stability of the country is tied to economic prosperity and the leadership knows it too. If the country were to go to a full scale depression like era in the US, civil discontent and unrest will be sure to rise significantly.

One thing I learnt during my internship in China would be that news read have to be taken with a pinch of salt. Initially, when I just read the news, I felt that the property market bubble in China seems on the verge of popping etc. However, if you actually talk to the people on the 'ground', people who are really within the real estate market they would tell you otherwise.

That said, everyone is focusing their attention on the FTZ policy in Shanghai. The next few steps of the government would be determined on the success of that.

I do agree with your post, but one question.

Why FTZ policies have direct impact on China property market? Shanghai FTZ is an important test bed for financial market liberalization in China, but might has little direct impact on China property market...

If China were to open their doors, the ease of Chinese money would be able to flow out way more easily as compared to now. One of the major reasons why first tier cities are still seeing increase in property prices would be that the Chinese in second tier and less are still investing their money there, given the closed economy policy the Chinese government practises. Furthermore, as we all know how what the China stock market is like, the Chinese prefer to be buying assets that are more tangible. If China were to be as open as developed nations are today, it would mean average income households would be able to invest in stocks/property overseas, decreasing the demand for local housing significantly. That said, its probably not a very direct link, but still a key step to a somewhat bigger picture? haha.
ValueEdge - Opportunities Within Asia
http://www.value-edge.com
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#9
(14-07-2014, 09:29 PM)heifien91 Wrote:
(14-07-2014, 03:39 PM)CityFarmer Wrote:
(14-07-2014, 11:39 AM)heifien91 Wrote:
(14-07-2014, 10:56 AM)theasiareport Wrote: Property market in China is one of the hardest puzzles... and just like the saying don't fight the Fed, is it wise to fight the Central Party?

The stability of the country is tied to economic prosperity and the leadership knows it too. If the country were to go to a full scale depression like era in the US, civil discontent and unrest will be sure to rise significantly.

One thing I learnt during my internship in China would be that news read have to be taken with a pinch of salt. Initially, when I just read the news, I felt that the property market bubble in China seems on the verge of popping etc. However, if you actually talk to the people on the 'ground', people who are really within the real estate market they would tell you otherwise.

That said, everyone is focusing their attention on the FTZ policy in Shanghai. The next few steps of the government would be determined on the success of that.

I do agree with your post, but one question.

Why FTZ policies have direct impact on China property market? Shanghai FTZ is an important test bed for financial market liberalization in China, but might has little direct impact on China property market...

If China were to open their doors, the ease of Chinese money would be able to flow out way more easily as compared to now. One of the major reasons why first tier cities are still seeing increase in property prices would be that the Chinese in second tier and less are still investing their money there, given the closed economy policy the Chinese government practises. Furthermore, as we all know how what the China stock market is like, the Chinese prefer to be buying assets that are more tangible. If China were to be as open as developed nations are today, it would mean average income households would be able to invest in stocks/property overseas, decreasing the demand for local housing significantly. That said, its probably not a very direct link, but still a key step to a somewhat bigger picture? haha.

The main purpose of new policies in FTZ, is to ease the flow of foreign money into China capital market.

Having said so, we will never know the impact of those new FTZ policies on China domestic market. It might be one of the scenario. Big Grin
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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#10
(14-07-2014, 09:44 PM)CityFarmer Wrote:
(14-07-2014, 09:29 PM)heifien91 Wrote:
(14-07-2014, 03:39 PM)CityFarmer Wrote:
(14-07-2014, 11:39 AM)heifien91 Wrote:
(14-07-2014, 10:56 AM)theasiareport Wrote: Property market in China is one of the hardest puzzles... and just like the saying don't fight the Fed, is it wise to fight the Central Party?

The stability of the country is tied to economic prosperity and the leadership knows it too. If the country were to go to a full scale depression like era in the US, civil discontent and unrest will be sure to rise significantly.

One thing I learnt during my internship in China would be that news read have to be taken with a pinch of salt. Initially, when I just read the news, I felt that the property market bubble in China seems on the verge of popping etc. However, if you actually talk to the people on the 'ground', people who are really within the real estate market they would tell you otherwise.

That said, everyone is focusing their attention on the FTZ policy in Shanghai. The next few steps of the government would be determined on the success of that.

I do agree with your post, but one question.

Why FTZ policies have direct impact on China property market? Shanghai FTZ is an important test bed for financial market liberalization in China, but might has little direct impact on China property market...

If China were to open their doors, the ease of Chinese money would be able to flow out way more easily as compared to now. One of the major reasons why first tier cities are still seeing increase in property prices would be that the Chinese in second tier and less are still investing their money there, given the closed economy policy the Chinese government practises. Furthermore, as we all know how what the China stock market is like, the Chinese prefer to be buying assets that are more tangible. If China were to be as open as developed nations are today, it would mean average income households would be able to invest in stocks/property overseas, decreasing the demand for local housing significantly. That said, its probably not a very direct link, but still a key step to a somewhat bigger picture? haha.

The main purpose of new policies in FTZ, is to ease the flow of foreign money into China capital market.

Having said so, we will never know the impact of those new FTZ policies on China domestic market. It might be one of the scenario. Big Grin

Haha I'm really looking long term like 10-15 years later I guess..hopefully by then China would be totally open without all the restrictions and better control on accounting frauds =/
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