After booming in recent years, China’s real estate market is finally starting to feel the pinch from sagging demand and tighter controls.
One of China’s biggest real estate agencies, Chuanghui Real Estate, has shuttered dozens of outlets in Shanghai and other cities, leaving angry customers and employees, after an ill-timed expansion just as the market was peaking. Many other agencies around the country have also closed down.
So far, the retrenchment appears to be mainly limited to property brokers. But the moves could herald the beginning of a broader slowdown in one of Asia’s hottest real estate markets.
The government has been wrestling to get control of the property sector, worried that rising prices for housing are pushing poorer Chinese out of the market at a time when overall inflation is surging.
Regulators stepped up curbs on the property market last year, alarmed that ‘bubbles’ in property prices could collapse and trigger a financial crisis. Those efforts are starting to take effect. While urban housing prices last month rose 10.5 per cent from a year earlier, a sharp slowdown in sales transactions in recent weeks suggests a new trend.
In the first week of 2008, home sales in Beijing fell 20 per cent compared with the previous week, the state-run newspaper China Securities News reported. Sales were off 38 per cent in Shenzhen and 52 per cent in east China’s Nanjing, it said.
Realtors say the slump started late last year but due to various reasons, like land supply and property hoarding by developers, the impact hasn’t been seen yet in prices.
So far, there are no signs of a mortgage meltdown in China similar to that seen in the US, and experts don’t foresee property prices to fall substantially. Strong economic growth and surging demand from upwardly mobile families are supporting demand.
But business is slowing, especially for the so-called ’second-hand’ apartments, or existing, rather than newly built homes, that are the lifeblood of local realtors in this recently commercialised market.
‘In 2008, we think property developers will face some liquidity problems and financing issues,’ Matthew Kong of ratings agency Fitch Asia Corporates said recently. — AP
Source : Business Times - 22 Jan 2008
Showing posts with label China. Show all posts
Showing posts with label China. Show all posts
Tuesday, January 22, 2008
Sunday, December 9, 2007
ALLGREEN Properties of Singapore is set to move into China
ALLGREEN Properties of Singapore is set to move into China in a big way with seven commercial and residential developments together with Hong Kong publicly listed companies Kerry Holdings and Kerry Properties. All the companies are controlled by Malaysian tycoon Robert Kuok.
The projects, which have a total investment amount of 29.3 billion yuan (S$5.73 billion), will be in the cities of Hangzhou, Chengdu, Qinhuangdao and Shenyang.
In a statement released yesterday, Allgreen said that this was in line with the group’s strategy to expand regionally, especially in China, which it views as a ‘long-term growth market’ providing ‘growth and recurrent income’.
Allgreen said: ‘In addition, the group will also be able to better allocate assets to ride out any downturn in the Singapore economy.’
The projects will mostly be residential but hotel, offices and commercial properties can also be expected. These projects also represents the group’s fourth investment in China.
Allgreen appointed Savills while Kerry Properties appointed DTZ Debenham Tie Leung to carry out valuations of the sites and the agreed property value was about 8.64 billion yuan.
Based on the agreed property value, the outstanding land cost and the non-property net asset value of the joint venture companies, the aggregate consideration payable by Allgreen for its acquisition of the equity interests in the joint venture is estimated to be about 967 million yuan.
Allgreen said that the group will fund the project by internal funds and/or external borrowings.
The statement also noted that the group’s aggregate maximum total investment amount in the joint venture is 6.98 billion yuan, representing about 96.2 per cent of its latest net tangible assets as at Dec 31, 2006.
No development time frame was given for the projects.
There is a mixed-use development planned, comprising hotel, offices, retail podiums and apartments on a 67,374 sq m site near West Lake in Hangzhou with a total investment amount of 5.34 billion yuan and Allgreen will hold a 10 per cent stake.
Also in Hangzhou will be a residential development on a 104,521 sq m site at Xiacheng District with a total investment amount of 1.83 billion yuan, of which Allgreen will hold a 35 per cent stake.
Another residential development is slated for Chengdu’s Hi-Tech Industrial Development Zone. To be built on a 46,130 sq m site, it will have a total investment amount of 1.38 billion yuan, of which Allgreen will have a 25 per cent stake.
Allgreen will also hold a 25 per cent stake in a second residential development on a 38,617 sq m site in Chengdu’s Hi-Tech Industrial Development Zone with a total investment amount of 1.16 billion yuan.
In Qinhuangdao, Allgreen will hold a 10 per cent stake in a mainly residential development on a 113,393 sq m site in the West Section of Hebei Street, Haigang District with an investment amount of 2.2 billion yuan.
Also in Qinhuangdao is another residential development on a 92,250 sq m site at the West Section of Hebei Street, Haigang District with an investment amount of 1.35 billion yuan, of which Allgreen will have a 10 per cent stake.
A mixed-use development has been planned for the 172,694 sq m site on the East Side of Qingnian Street, Shenhe District in Shenyang with a total investment amount of 16 billion yuan. Allgreen will take a 30 per cent stake in this project.
Source : Business Times - 7 Dec 2007
The projects, which have a total investment amount of 29.3 billion yuan (S$5.73 billion), will be in the cities of Hangzhou, Chengdu, Qinhuangdao and Shenyang.
In a statement released yesterday, Allgreen said that this was in line with the group’s strategy to expand regionally, especially in China, which it views as a ‘long-term growth market’ providing ‘growth and recurrent income’.
Allgreen said: ‘In addition, the group will also be able to better allocate assets to ride out any downturn in the Singapore economy.’
The projects will mostly be residential but hotel, offices and commercial properties can also be expected. These projects also represents the group’s fourth investment in China.
Allgreen appointed Savills while Kerry Properties appointed DTZ Debenham Tie Leung to carry out valuations of the sites and the agreed property value was about 8.64 billion yuan.
Based on the agreed property value, the outstanding land cost and the non-property net asset value of the joint venture companies, the aggregate consideration payable by Allgreen for its acquisition of the equity interests in the joint venture is estimated to be about 967 million yuan.
Allgreen said that the group will fund the project by internal funds and/or external borrowings.
The statement also noted that the group’s aggregate maximum total investment amount in the joint venture is 6.98 billion yuan, representing about 96.2 per cent of its latest net tangible assets as at Dec 31, 2006.
No development time frame was given for the projects.
There is a mixed-use development planned, comprising hotel, offices, retail podiums and apartments on a 67,374 sq m site near West Lake in Hangzhou with a total investment amount of 5.34 billion yuan and Allgreen will hold a 10 per cent stake.
Also in Hangzhou will be a residential development on a 104,521 sq m site at Xiacheng District with a total investment amount of 1.83 billion yuan, of which Allgreen will hold a 35 per cent stake.
Another residential development is slated for Chengdu’s Hi-Tech Industrial Development Zone. To be built on a 46,130 sq m site, it will have a total investment amount of 1.38 billion yuan, of which Allgreen will have a 25 per cent stake.
Allgreen will also hold a 25 per cent stake in a second residential development on a 38,617 sq m site in Chengdu’s Hi-Tech Industrial Development Zone with a total investment amount of 1.16 billion yuan.
In Qinhuangdao, Allgreen will hold a 10 per cent stake in a mainly residential development on a 113,393 sq m site in the West Section of Hebei Street, Haigang District with an investment amount of 2.2 billion yuan.
Also in Qinhuangdao is another residential development on a 92,250 sq m site at the West Section of Hebei Street, Haigang District with an investment amount of 1.35 billion yuan, of which Allgreen will have a 10 per cent stake.
A mixed-use development has been planned for the 172,694 sq m site on the East Side of Qingnian Street, Shenhe District in Shenyang with a total investment amount of 16 billion yuan. Allgreen will take a 30 per cent stake in this project.
Source : Business Times - 7 Dec 2007
Monday, November 19, 2007
The vision is for the Sino-Singapore Tianjin Eco-City to be a model of sustainable development that is socially harmonious, environmentally friendly
The vision is for the Sino-Singapore Tianjin Eco-City to be a model of sustainable development that is socially harmonious, environmentally friendly and resource-efficient.
It will be developed by a joint venture between a Singapore consortium led by Keppel Corporation and a PRC consortium comprising Chinese companies such as the Tianjin Binhai New Area Urban Infrastructure Construction Investment Co Ltd, Tianjin TEDA Investment Holdings Co Ltd and the China Development Bank.
Prime Minister Lee Hsien Loong said he was pleased with the decision and was confident the Chinese central government and the Tianjin government will give the project their full support.
This project is yet another flagship of bilateral cooperation between Singapore and China since the 13-year-old Suzhou Industrial Park, visiting Chinese Premier Wen Jiabao said.
‘The Suzhou Industrial Park has become a crystallisation of the friendship between our two countries, and with the eco-city to be built in Tianjin, it will become another highlight in our relations,’ Premier Wen added.
The two leaders signed a framework agreement that set the parameters for collaboration, while a supplementary pact that guide the implementation details was signed by Minister for National Development Mah Bow Tan and China’s Construction Minister Wang Guangtao.
Under the framework agreement, China and Singapore will share their expertise and experiences in the formulation of policies and programmes to engender social harmony, urban planning, environment protection, resource conservation, recycling, ecological infrastructure development, use of renewable resources, reuse of wastewater and sustainable development.
Deputy Prime Minister Wong Kan Seng and Vice- Premier Wu Yi will jointly chair a Singapore-PRC Joint Steering Committee (JSC) to oversee all major issues relating to the development of the eco-city project while a Joint Working Committee (JWC), co-chaired by Mr Mah and Mr Wang will address issues and problems related to the development. The JWC will report to the JSC, which will be under the Joint Council for Bilateral Cooperation (JCBC).
The key outcomes spelt out under the supplementary agreement are a vibrant local economy with good environmental conditions, the formation of socially harmonious and inclusive communities, good environmental technologies and practices, and a reference for other cities in China in the management, technological and policy aspects.
Further details of the eco-city are being finalised.
Earlier on, the leaders met for about an hour, where they reviewed the 17 years of Sino-Singapore bilateral ties and discussed other issues such as Singapore-China free trade agreement, cross-straits situation and Myanmar.
Both leaders expressed confidence in the current state of relationships that are based on mutual interests and respect.
‘Our relations are good because the foundations of the relations are based on compatible strategic views of the way Asia is developing, of China’s development, and peaceful emergence into the world order,’ PM Lee said.
‘Therefore, we believe that there’s room for us to work together for mutual benefit and on the basis of equality and mutual respect.’
Yesterday’s state visit by Premier Wen also saw the official launch of the Singapore China Foundation (SCF) which seeks to strengthen people-to-people ties between Singapore and China through cooperation in education and human resource development.
The SCF currently offers two scholarship schemes to Singaporeans and PRC nationals to pursue Master programmes and executive programmes in Singapore and China and has awarded scholarship schemes to more than 20 Singaporean and Chinese officials since its inception under a memorandum of understanding in 2004.
PM Lee also hosted Premier Wen to an official dinner banquet yesterday at the Istana Banquet Hall.
In the days ahead, Premier Wen will be attending a series of high-level regional summits here, including the 11th Asean Plus Three Summit and the Third East Asia Summit that are held alongside the 13th Asean Summit. He will deliver a keynote speech at the National University of Singapore today.
Source: Business Times 19 Nov 07
It will be developed by a joint venture between a Singapore consortium led by Keppel Corporation and a PRC consortium comprising Chinese companies such as the Tianjin Binhai New Area Urban Infrastructure Construction Investment Co Ltd, Tianjin TEDA Investment Holdings Co Ltd and the China Development Bank.
Prime Minister Lee Hsien Loong said he was pleased with the decision and was confident the Chinese central government and the Tianjin government will give the project their full support.
This project is yet another flagship of bilateral cooperation between Singapore and China since the 13-year-old Suzhou Industrial Park, visiting Chinese Premier Wen Jiabao said.
‘The Suzhou Industrial Park has become a crystallisation of the friendship between our two countries, and with the eco-city to be built in Tianjin, it will become another highlight in our relations,’ Premier Wen added.
The two leaders signed a framework agreement that set the parameters for collaboration, while a supplementary pact that guide the implementation details was signed by Minister for National Development Mah Bow Tan and China’s Construction Minister Wang Guangtao.
Under the framework agreement, China and Singapore will share their expertise and experiences in the formulation of policies and programmes to engender social harmony, urban planning, environment protection, resource conservation, recycling, ecological infrastructure development, use of renewable resources, reuse of wastewater and sustainable development.
Deputy Prime Minister Wong Kan Seng and Vice- Premier Wu Yi will jointly chair a Singapore-PRC Joint Steering Committee (JSC) to oversee all major issues relating to the development of the eco-city project while a Joint Working Committee (JWC), co-chaired by Mr Mah and Mr Wang will address issues and problems related to the development. The JWC will report to the JSC, which will be under the Joint Council for Bilateral Cooperation (JCBC).
The key outcomes spelt out under the supplementary agreement are a vibrant local economy with good environmental conditions, the formation of socially harmonious and inclusive communities, good environmental technologies and practices, and a reference for other cities in China in the management, technological and policy aspects.
Further details of the eco-city are being finalised.
Earlier on, the leaders met for about an hour, where they reviewed the 17 years of Sino-Singapore bilateral ties and discussed other issues such as Singapore-China free trade agreement, cross-straits situation and Myanmar.
Both leaders expressed confidence in the current state of relationships that are based on mutual interests and respect.
‘Our relations are good because the foundations of the relations are based on compatible strategic views of the way Asia is developing, of China’s development, and peaceful emergence into the world order,’ PM Lee said.
‘Therefore, we believe that there’s room for us to work together for mutual benefit and on the basis of equality and mutual respect.’
Yesterday’s state visit by Premier Wen also saw the official launch of the Singapore China Foundation (SCF) which seeks to strengthen people-to-people ties between Singapore and China through cooperation in education and human resource development.
The SCF currently offers two scholarship schemes to Singaporeans and PRC nationals to pursue Master programmes and executive programmes in Singapore and China and has awarded scholarship schemes to more than 20 Singaporean and Chinese officials since its inception under a memorandum of understanding in 2004.
PM Lee also hosted Premier Wen to an official dinner banquet yesterday at the Istana Banquet Hall.
In the days ahead, Premier Wen will be attending a series of high-level regional summits here, including the 11th Asean Plus Three Summit and the Third East Asia Summit that are held alongside the 13th Asean Summit. He will deliver a keynote speech at the National University of Singapore today.
Source: Business Times 19 Nov 07
CHINA’S economy has little chance of achieving a soft landing once the ‘bubble’ in stock market and real estate prices there bursts
CHINA’S economy has little chance of achieving a soft landing once the ‘bubble’ in stock market and real estate prices there bursts, according to former senior Japanese finance ministry official Toyoo Gyohten, who now heads one of Asia’s leading economic research institutes.
Meanwhile, resentment over the pace of change in China is growing among social groups ranging from farmers to city dwellers and intellectuals and could erupt, he said.
Mr Gyohten’s bearish comments on China were made at a briefing in Tokyo last Friday shortly after the World Bank predicted continuing strong growth in China’s economy and that it would not suffer greatly from any popping of the bubble in asset prices.
The World Bank analysis that China and the rest of East Asia would be little impacted by a slowdown in the US economy was also challenged by Chinese officials who said that it could be very serious.
World Bank claims that an asset bubble burst in China would have limited impact because it has not been accompanied by a boom in consumption were rejected by Mr Gyohten. The former vice-finance minister for international affairs, now president of the Tokyo-based Institute of International Monetary Affairs, said that fallout from an asset price implosion, in the shape of surging bankruptcies, unemployment and bad loans in the banking system, would be highly damaging to China’s economy.
Six rises in China’s interest rates plus nine increases in banking reserve requirements plus the imposition of administrative controls on bank lending have failed to curb the runaway trend in stocks and other assets prices while inflation has now hit its highest level in ten years, said Mr Gyohten.
Chinese authorities will probably tighten monetary conditions further to contain these pressures, or some other event will trigger an asset bust, he said. ‘Either way, there is little possibility of a soft landing.’
A former chairman of the Bank of Tokyo and now special advisor to the Bank of Tokyo-Mitsubishi UFJ, Mr Gyohten also said that he ‘could not rule out the possibility of a major revaluation of the Chinese yuan,’ owing to growing pressure from Europe as well as the United States for such a move.
‘We cannot deny that the (currency) is undervalued,’ he said, noting that it had risen in value by only around 10 per cent against the dollar since 2005.
Mr Gyohten’s analysis of China’s political situation was even more downbeat than his comments on the country’s economy. ‘At various levels of government (in China) there is increasing corruption and wrongdoing,’ he said.
Social resentment is rising and ‘people are beginning to question the legitimacy of the dictatorship of the communist party. The thing the leadership fears most is revolution.’
Chinese authorities will probably seek to quicken the pace of ‘gradualist’ political reform, he suggested. While the past 30 years have been devoted to establishing China’s presence among the world’s leading economies, the next 30 years will see an attempt by China to cement the market economy and to establish political stability under the leadership of the communist party, he added.
Source: Business Times 19 Nov 07
Meanwhile, resentment over the pace of change in China is growing among social groups ranging from farmers to city dwellers and intellectuals and could erupt, he said.
Mr Gyohten’s bearish comments on China were made at a briefing in Tokyo last Friday shortly after the World Bank predicted continuing strong growth in China’s economy and that it would not suffer greatly from any popping of the bubble in asset prices.
The World Bank analysis that China and the rest of East Asia would be little impacted by a slowdown in the US economy was also challenged by Chinese officials who said that it could be very serious.
World Bank claims that an asset bubble burst in China would have limited impact because it has not been accompanied by a boom in consumption were rejected by Mr Gyohten. The former vice-finance minister for international affairs, now president of the Tokyo-based Institute of International Monetary Affairs, said that fallout from an asset price implosion, in the shape of surging bankruptcies, unemployment and bad loans in the banking system, would be highly damaging to China’s economy.
Six rises in China’s interest rates plus nine increases in banking reserve requirements plus the imposition of administrative controls on bank lending have failed to curb the runaway trend in stocks and other assets prices while inflation has now hit its highest level in ten years, said Mr Gyohten.
Chinese authorities will probably tighten monetary conditions further to contain these pressures, or some other event will trigger an asset bust, he said. ‘Either way, there is little possibility of a soft landing.’
A former chairman of the Bank of Tokyo and now special advisor to the Bank of Tokyo-Mitsubishi UFJ, Mr Gyohten also said that he ‘could not rule out the possibility of a major revaluation of the Chinese yuan,’ owing to growing pressure from Europe as well as the United States for such a move.
‘We cannot deny that the (currency) is undervalued,’ he said, noting that it had risen in value by only around 10 per cent against the dollar since 2005.
Mr Gyohten’s analysis of China’s political situation was even more downbeat than his comments on the country’s economy. ‘At various levels of government (in China) there is increasing corruption and wrongdoing,’ he said.
Social resentment is rising and ‘people are beginning to question the legitimacy of the dictatorship of the communist party. The thing the leadership fears most is revolution.’
Chinese authorities will probably seek to quicken the pace of ‘gradualist’ political reform, he suggested. While the past 30 years have been devoted to establishing China’s presence among the world’s leading economies, the next 30 years will see an attempt by China to cement the market economy and to establish political stability under the leadership of the communist party, he added.
Source: Business Times 19 Nov 07
Thursday, November 15, 2007
China’s house prices rose in October at the fastest pace
China’s house prices rose in October at the fastest pace since 2005 as inflation outpaced returns on bank deposits, encouraging households to invest in property.
Prices in 70 major cities jumped 9.5 per cent from a year earlier after gaining 8.9 per cent in September, the National Development and Reform Commission said yesterday on its web site. That was the biggest gain since records began in August 2005. Values climbed 1.6 per cent from September.
The acceleration is fuelled by the cash flood from China’s trade surplus, a record US$27 billion in October, prompting concerns about a possible property bubble.
China in September raised interest rates on some mortgages and increased minimum down payments to curb real estate speculation.
‘Price gains are understandable because the strong demand is still out there,’ said Liu Xihui, a Shenzhen-based analyst with Ping An Securities Co. ‘The reason prices are still accelerating is probably because September’s tightening measures haven’t yet had an effect.’
Prices soared 19.5 per cent in October from a year earlier in Shenzhen and 15.1 per cent in Beijing, the commission said. New commercial housing valuations rose 10.6 per cent from a year earlier and second-hand prices increased by 8.7 per cent, it said.
Measures introduced by China on Sept 27 to damp property speculation included raising downpayments to 40 per cent from 30 per cent for housing loans, and to half a property’s value for commercial real estate.
The steps will slow property price increases in the balance of the year by crimping buying for investment purposes, said Ping An Securities’ Liu. Housing sold to buyers hoping to sell at anticipated higher prices accounts for a ‘big part’ of total sales, he said.
September’s measures came after new taxes, higher mortgage rates and downpayment ratios imposed since 2005 failed to cool the market. Investment in real estate development jumped 30.3 per cent in the first nine months of 2007, 6 percentage points faster than a year earlier.
China’s consumer prices rose 6.5 per cent last month from a year earlier, matching the decade high in August, as food costs surged. The benchmark one-year deposit rate is 3.87 per cent.
China has this year raised interest rates five times and ordered lenders on nine occasions to set aside larger reserves to curb inflation and contain bubbles in the property and stock markets. — Bloomberg
Source : Business Times - 15 Nov 2007
Prices in 70 major cities jumped 9.5 per cent from a year earlier after gaining 8.9 per cent in September, the National Development and Reform Commission said yesterday on its web site. That was the biggest gain since records began in August 2005. Values climbed 1.6 per cent from September.
The acceleration is fuelled by the cash flood from China’s trade surplus, a record US$27 billion in October, prompting concerns about a possible property bubble.
China in September raised interest rates on some mortgages and increased minimum down payments to curb real estate speculation.
‘Price gains are understandable because the strong demand is still out there,’ said Liu Xihui, a Shenzhen-based analyst with Ping An Securities Co. ‘The reason prices are still accelerating is probably because September’s tightening measures haven’t yet had an effect.’
Prices soared 19.5 per cent in October from a year earlier in Shenzhen and 15.1 per cent in Beijing, the commission said. New commercial housing valuations rose 10.6 per cent from a year earlier and second-hand prices increased by 8.7 per cent, it said.
Measures introduced by China on Sept 27 to damp property speculation included raising downpayments to 40 per cent from 30 per cent for housing loans, and to half a property’s value for commercial real estate.
The steps will slow property price increases in the balance of the year by crimping buying for investment purposes, said Ping An Securities’ Liu. Housing sold to buyers hoping to sell at anticipated higher prices accounts for a ‘big part’ of total sales, he said.
September’s measures came after new taxes, higher mortgage rates and downpayment ratios imposed since 2005 failed to cool the market. Investment in real estate development jumped 30.3 per cent in the first nine months of 2007, 6 percentage points faster than a year earlier.
China’s consumer prices rose 6.5 per cent last month from a year earlier, matching the decade high in August, as food costs surged. The benchmark one-year deposit rate is 3.87 per cent.
China has this year raised interest rates five times and ordered lenders on nine occasions to set aside larger reserves to curb inflation and contain bubbles in the property and stock markets. — Bloomberg
Source : Business Times - 15 Nov 2007
Monday, November 12, 2007
Chinese property developer Yanlord Land Group Ltd said Friday it has acquired a residential site in Shanghai, China for 1.3 billion yuan.
SINGAPORE, Nov 09, 2007 (Thomson Financial via COMTEX) -- YLDGF | charts | news | PowerRating -- Chinese property developer Yanlord Land Group Ltd said Friday it has acquired a residential site in Shanghai, China for 1.3 billion yuan.
The site, with a gross floor area of 65,050 square meters, was auctioned by the Chinese government.
"Shanghai remains a key focus in our expansion strategy. The acquisition of this new site demonstrates our continued confidence in the strong potential of the Shanghai real estate sector," said Zhong Sheng Jian, chairman and CEO of Yanlord.
Yanlord plans to build a high-rise residential condominium on the site.
Analysts are bullish on Yanlord even as the company reported on Wednesday its net profit fell 11 percent to 34.6 million Singapore dollars from a year earlier.
"The group will continue to benefit from the rising domestic economy which has fueled a 10 percent year-on-year rise in high-end residential properties," DBS Vickers said in a note to clients.
The brokerage rates Yanlord a "buy" with a target price of 4.27 dollars.
The site, with a gross floor area of 65,050 square meters, was auctioned by the Chinese government.
"Shanghai remains a key focus in our expansion strategy. The acquisition of this new site demonstrates our continued confidence in the strong potential of the Shanghai real estate sector," said Zhong Sheng Jian, chairman and CEO of Yanlord.
Yanlord plans to build a high-rise residential condominium on the site.
Analysts are bullish on Yanlord even as the company reported on Wednesday its net profit fell 11 percent to 34.6 million Singapore dollars from a year earlier.
"The group will continue to benefit from the rising domestic economy which has fueled a 10 percent year-on-year rise in high-end residential properties," DBS Vickers said in a note to clients.
The brokerage rates Yanlord a "buy" with a target price of 4.27 dollars.
Saturday, November 10, 2007
China’s economic planning agency has issued restrictions on foreign investment in real estate and other industries
China’s economic planning agency has issued restrictions on foreign investment in real estate and other industries, part of a range of measures aimed at righting imbalances in the economy.
A lengthy list of revised rules that take effect on Dec 1 imposes bans on foreign investment in businesses such as golf courses, gambling, genetically modified crops, traditional teas, film production and weapons manufacturing, according to a document seen yesterday on the website of the National Development and Reform Commission.
China’s leaders have touted a shift in planning away from hyper-fast industrial expansion toward a more sustainable form of development.The change hasn’t yet been reflected in data showing the economy growing at an annual rate of nearly 12 per cent.
The revised guidelines welcome foreign investment in environmentally friendly areas such as recycling, ‘clean’ industries and environmental protection.
They ban foreign investment in mining of strategically important minerals and restrict investment in energy intensive, highly polluting projects.
Some restrictions are for illegal businesses, such as the processing of ivory and tiger bones. Others, such as a ban on foreign investment in Internet services and news websites, had been announced earlier.
Many match a list issued by the NDRC in 2004. The reissue of the rules suggests that some, like limits on foreign investment in real estate, were not adequately enforced.
State media reports played up the limits on property investment, although apart from the ban on investment in golf courses and in real estate agencies, the list matches current regulations.
The NDRC’s list also discourages investment in export-oriented industries, reflecting China’s efforts to curb its ever-soaring trade surplus, which is expected to top US$200 billion this year.
Foreign direct investment in China rose almost 11 per cent in January-September from a year ago to US$47.2 billion, according to the state media reports. Of that total, foreign investment in property development accounted for 42.3 billion yuan (US$5.7 billion).
Foreign direct investment in 2006 totalled US$63 billion. — AP
Source : Business Times - 9 Nov 2007
A lengthy list of revised rules that take effect on Dec 1 imposes bans on foreign investment in businesses such as golf courses, gambling, genetically modified crops, traditional teas, film production and weapons manufacturing, according to a document seen yesterday on the website of the National Development and Reform Commission.
China’s leaders have touted a shift in planning away from hyper-fast industrial expansion toward a more sustainable form of development.The change hasn’t yet been reflected in data showing the economy growing at an annual rate of nearly 12 per cent.
The revised guidelines welcome foreign investment in environmentally friendly areas such as recycling, ‘clean’ industries and environmental protection.
They ban foreign investment in mining of strategically important minerals and restrict investment in energy intensive, highly polluting projects.
Some restrictions are for illegal businesses, such as the processing of ivory and tiger bones. Others, such as a ban on foreign investment in Internet services and news websites, had been announced earlier.
Many match a list issued by the NDRC in 2004. The reissue of the rules suggests that some, like limits on foreign investment in real estate, were not adequately enforced.
State media reports played up the limits on property investment, although apart from the ban on investment in golf courses and in real estate agencies, the list matches current regulations.
The NDRC’s list also discourages investment in export-oriented industries, reflecting China’s efforts to curb its ever-soaring trade surplus, which is expected to top US$200 billion this year.
Foreign direct investment in China rose almost 11 per cent in January-September from a year ago to US$47.2 billion, according to the state media reports. Of that total, foreign investment in property development accounted for 42.3 billion yuan (US$5.7 billion).
Foreign direct investment in 2006 totalled US$63 billion. — AP
Source : Business Times - 9 Nov 2007
Friday, November 2, 2007
Singapore and Chinese enterprises can draw on their different strengths and complement each other to explore external markets such as the Middle East.
S'pore, China firms can jointly explore external markets
By Wong Yee Fong, Channel NewsAsia's China correspondent | Posted: 02 November 2007 2148 hrs
NANJING, CHINA: Singapore and Chinese enterprises can draw on their different strengths and complement each other to explore external markets such as the Middle East.
Singapore's Minister of State for Trade and Industry, Mr Lee Yi Shyan, said this after attending a business forum in China's Jiangsu province.
Singapore and Jiangsu have enjoyed close ties since they developed the Suzhou Industrial Park together in 1994.
The long-time partners are now in a position to jointly explore opportunities abroad, said Mr Lee.
He said: "For instance, our architects or engineering firms can partner with some of the construction firms in China to undertake some of the largest projects in the Middle East.....civil engineering, construction, airport, seaport or waste treatment or power plant."
More and more Chinese companies are seeking management know-how and expertise to help them position themselves in global markets.
Mr Lee said Singapore plays a unique role with its location, being seven hours away from China and the Middle East.
If such a partnership is realised, perhaps some of the Chinese labels would be found in the Middle East some day.
The Singapore Minister of State also proposed possible joint business missions to India, Russia and Southeast Asia.
Mr Lee was speaking after attending the Jiangsu Enterprises Internationalisation Forum held in the provincial capital Nanjing.
More than 100 businessman and government officials from Jiangsu and Singapore attended the event organised by IE Singapore.
Ma Guiliang, assistant to general manager of Jiangnan Environmental Protection Company, said: "I'm interested in the way countries like Singapore control atmospheric pollution. "
Choe Peng Sum, chief executive officer of Frasers Hospitality, said: "We are looking at several areas in Wuxi, Suzhou. Nanjing itself has a lot of opportunities, apart from the one we have."
Frasers Hospitality (a Singapore property management company) and Yanlord Land (a Singapore property developer) have jointly launched their first serviced residence in Hexi, a new central business district.
It is the first of ten such residences by Frasers in China. - CNA/ir
By Wong Yee Fong, Channel NewsAsia's China correspondent | Posted: 02 November 2007 2148 hrs
NANJING, CHINA: Singapore and Chinese enterprises can draw on their different strengths and complement each other to explore external markets such as the Middle East.
Singapore's Minister of State for Trade and Industry, Mr Lee Yi Shyan, said this after attending a business forum in China's Jiangsu province.
Singapore and Jiangsu have enjoyed close ties since they developed the Suzhou Industrial Park together in 1994.
The long-time partners are now in a position to jointly explore opportunities abroad, said Mr Lee.
He said: "For instance, our architects or engineering firms can partner with some of the construction firms in China to undertake some of the largest projects in the Middle East.....civil engineering, construction, airport, seaport or waste treatment or power plant."
More and more Chinese companies are seeking management know-how and expertise to help them position themselves in global markets.
Mr Lee said Singapore plays a unique role with its location, being seven hours away from China and the Middle East.
If such a partnership is realised, perhaps some of the Chinese labels would be found in the Middle East some day.
The Singapore Minister of State also proposed possible joint business missions to India, Russia and Southeast Asia.
Mr Lee was speaking after attending the Jiangsu Enterprises Internationalisation Forum held in the provincial capital Nanjing.
More than 100 businessman and government officials from Jiangsu and Singapore attended the event organised by IE Singapore.
Ma Guiliang, assistant to general manager of Jiangnan Environmental Protection Company, said: "I'm interested in the way countries like Singapore control atmospheric pollution. "
Choe Peng Sum, chief executive officer of Frasers Hospitality, said: "We are looking at several areas in Wuxi, Suzhou. Nanjing itself has a lot of opportunities, apart from the one we have."
Frasers Hospitality (a Singapore property management company) and Yanlord Land (a Singapore property developer) have jointly launched their first serviced residence in Hexi, a new central business district.
It is the first of ten such residences by Frasers in China. - CNA/ir
Tuesday, October 16, 2007
Chinese bank eyeing Bear Stearns, govt official says
BEIJING : China's CITIC Bank may bid for Wall Street investment bank Bear Stearns, a senior Chinese government official said Tuesday.
"CITIC Bank is considering a bid for Bear Stearns," Jiang Dingzhi, vice chairman of the China Banking Regulatory Commission, the industry watchdog, told reporters.
It was the first time that a potential Chinese buyer was mentioned in connection with the future of the US financial giant, which was badly hit by a crisis in the US sub-prime mortgage sector.
However, an official with the CITIC bank later said he was not aware of such a plan.
"This is the first time I have ever heard about such a matter," Peng Jinhui, a CITIC bank spokesman, told AFP.
China is encouraging its financial institutions to invest abroad as part of its efforts to reduce excess liquidity in the domestic market and mitigate increasing international pressure on the rise of the Chinese currency.
In May, China Investment Corp, the country's forex investment agency, invested three billion dollars in US private equity group Blackstone even before it was officially launched in September.
- AFP /ls
"CITIC Bank is considering a bid for Bear Stearns," Jiang Dingzhi, vice chairman of the China Banking Regulatory Commission, the industry watchdog, told reporters.
It was the first time that a potential Chinese buyer was mentioned in connection with the future of the US financial giant, which was badly hit by a crisis in the US sub-prime mortgage sector.
However, an official with the CITIC bank later said he was not aware of such a plan.
"This is the first time I have ever heard about such a matter," Peng Jinhui, a CITIC bank spokesman, told AFP.
China is encouraging its financial institutions to invest abroad as part of its efforts to reduce excess liquidity in the domestic market and mitigate increasing international pressure on the rise of the Chinese currency.
In May, China Investment Corp, the country's forex investment agency, invested three billion dollars in US private equity group Blackstone even before it was officially launched in September.
- AFP /ls
China eyes stake in Hong Kong stock exchange: report
HONG KONG: China may be accumulating shares in the Hong Kong Exchanges and Clearing (HKEx), which operates the territory's stock exchange, through state-run agencies, a report said on Thursday.
Citing unnamed sources, the Times newspaper in London reported the recent spikes in HKEx's share price were likely to have been driven by the first but still unofficial purchase of HKEx shares by China Investment Corp (CIC).
CIC, which has yet to be officially launched, has been set up by the Chinese government to try and maximise investment returns from the country's foreign exchange reserves.
The Times cited unnamed Hong Kong-based traders as saying that while it was not possible to track precisely what was driving the sharp HKEx stock price movements, there were "unmistakable" signs of buying pressure from Beijing.
It said that some traders were speculating that the mainland government might also be investing in HKEx through another state-controlled vehicle, the 53-billion-US-dollar National Social Security Fund.
A HKEx spokesman would not comment "market speculation".
CIC has denied that it invested in HKEx, the Hong Kong Economic Times reported. Its spokesman said the company had no other investment apart from the 3-billion-US-dollar stake in Blackstone Group of the US.
Media reports have speculated that China's new investment agency could have bought shares of HKEx, triggering a 22 percent surge in HKEx's shares over two trading until this Monday.
HKEx also traded sharply higher on Thursday. By late morning, HKEx shares traded up 6.4 or 2.75 percent at 239.00 Hong Kong dollars (30.6 US), off a high of 246.00.
Citing unnamed sources close to the matter, state media China Securities Journal had reported said CIC will have a registered capital of 200 billion US dollars. It said CIC will begin formal operations this Saturday.
Hopes of further fund inflows into the local bourse from China following reports the mainland's new investment company will start operations on Saturday lent support in the stock market.
"These news are providing a further excuse for investors to buy the share," said DBS Vickers director Peter Lai.
China's strong exports and increased investments have boosted the country's foreign exchange reserves, which totalled almost 1.4 trillion US dollars as of July.
By setting up a company which could invest part of its forex reserves, China could divert some of its funds outside the mainland while easing pressure on its currency, the yuan.
- AFP/so
Citing unnamed sources, the Times newspaper in London reported the recent spikes in HKEx's share price were likely to have been driven by the first but still unofficial purchase of HKEx shares by China Investment Corp (CIC).
CIC, which has yet to be officially launched, has been set up by the Chinese government to try and maximise investment returns from the country's foreign exchange reserves.
The Times cited unnamed Hong Kong-based traders as saying that while it was not possible to track precisely what was driving the sharp HKEx stock price movements, there were "unmistakable" signs of buying pressure from Beijing.
It said that some traders were speculating that the mainland government might also be investing in HKEx through another state-controlled vehicle, the 53-billion-US-dollar National Social Security Fund.
A HKEx spokesman would not comment "market speculation".
CIC has denied that it invested in HKEx, the Hong Kong Economic Times reported. Its spokesman said the company had no other investment apart from the 3-billion-US-dollar stake in Blackstone Group of the US.
Media reports have speculated that China's new investment agency could have bought shares of HKEx, triggering a 22 percent surge in HKEx's shares over two trading until this Monday.
HKEx also traded sharply higher on Thursday. By late morning, HKEx shares traded up 6.4 or 2.75 percent at 239.00 Hong Kong dollars (30.6 US), off a high of 246.00.
Citing unnamed sources close to the matter, state media China Securities Journal had reported said CIC will have a registered capital of 200 billion US dollars. It said CIC will begin formal operations this Saturday.
Hopes of further fund inflows into the local bourse from China following reports the mainland's new investment company will start operations on Saturday lent support in the stock market.
"These news are providing a further excuse for investors to buy the share," said DBS Vickers director Peter Lai.
China's strong exports and increased investments have boosted the country's foreign exchange reserves, which totalled almost 1.4 trillion US dollars as of July.
By setting up a company which could invest part of its forex reserves, China could divert some of its funds outside the mainland while easing pressure on its currency, the yuan.
- AFP/so
China wants state firms to launch Hong Kong IPOs
BEIJING - The Chinese government wants more of the nation's state-owned enterprises to list on the Hong Kong market, official media reported, citing the chief official in charge of state assets.
"(We) encourage state-owned enterprises to list in Hong Kong," said Li Rongrong, the head of the State-owned Assets Supervision and Administration Commission, according to a Xinhua news agency report late Monday.
"But the actual concrete decision on listing must be made by the companies themselves."
Meanwhile, the Hong Kong-based South China Morning Post quoted Li as saying the Hong Kong Stock Exchange should do more to make it easier for Chinese companies to list.
"(Hong Kong's) financial market should also make some improvements before (listings) can go further," said Li, according to the report.
Li's remarks come at a time when Chinese enterprises seem keen to raise funds at home, rather than in Hong Kong, which previously was a much-coveted venue for mainland initial public offerings.
As of last week, Chinese firms had raised a record 56.7 billion dollars on the nation's bourse since early 2007.
That figure beats the 56.5 billion dollars raised on China's markets in the four years from 2002 to 2006, said Xinhua news agency, in a remarkable turnaround of investor confidence.
China's stock market, long in the doldrums, rose 130 percent last year, and has soared another 120 percent in 2007. - AFP/ir
"(We) encourage state-owned enterprises to list in Hong Kong," said Li Rongrong, the head of the State-owned Assets Supervision and Administration Commission, according to a Xinhua news agency report late Monday.
"But the actual concrete decision on listing must be made by the companies themselves."
Meanwhile, the Hong Kong-based South China Morning Post quoted Li as saying the Hong Kong Stock Exchange should do more to make it easier for Chinese companies to list.
"(Hong Kong's) financial market should also make some improvements before (listings) can go further," said Li, according to the report.
Li's remarks come at a time when Chinese enterprises seem keen to raise funds at home, rather than in Hong Kong, which previously was a much-coveted venue for mainland initial public offerings.
As of last week, Chinese firms had raised a record 56.7 billion dollars on the nation's bourse since early 2007.
That figure beats the 56.5 billion dollars raised on China's markets in the four years from 2002 to 2006, said Xinhua news agency, in a remarkable turnaround of investor confidence.
China's stock market, long in the doldrums, rose 130 percent last year, and has soared another 120 percent in 2007. - AFP/ir
Sunday, October 14, 2007
Singapore Season on the right track in China: Dr Lee Boon Yang
BEIJING: It may be the first leg of the Singapore Season in China, but the warm reception in Beijing shows the event is on the right track, said Minister of Information, Communications and the Arts, Dr Lee Boon Yang.
The Singapore Chinese Orchestra played to an appreciative audience and received a standing ovation for its inaugural performance at the Singapore Season in Beijing.
Over at Factory 798, a creative district converted from former state-owned factories, an exhibition on Singapore art was also well received.
Touched by the warm reception, Dr Lee said he looks forward to the next Singapore Season in 2009.
"We have broadened and also deepened the scope of Singapore Season and I think that makes for a more rounded presentation of Singapore arts and culture to our audience in China," he said.
The Singapore Season, which kicked off on 12 October, showcases art performances and exhibitions by private and government agencies such as the Singapore Tourism Board and Contact Singapore.
In total, 14 government agencies and numerous private organisations are involved in this concerted marketing effort for Singapore.
Dr Lee hopes to connect with the Chinese through this multi-faceted presentation and pave the way for many more collaborations between the two countries.
So far, 12 agreements have been inked in the media sector alone, including one between Singapore's Media Development Authority and China's State Administration of Radio, Film and Television.
The Singapore Art Museum and the National Art Museum of China also signed an agreement to hold joint exhibitions as well as other exchanges.
The Singapore Chinese Orchestra played to an appreciative audience and received a standing ovation for its inaugural performance at the Singapore Season in Beijing.
Over at Factory 798, a creative district converted from former state-owned factories, an exhibition on Singapore art was also well received.
Touched by the warm reception, Dr Lee said he looks forward to the next Singapore Season in 2009.
"We have broadened and also deepened the scope of Singapore Season and I think that makes for a more rounded presentation of Singapore arts and culture to our audience in China," he said.
The Singapore Season, which kicked off on 12 October, showcases art performances and exhibitions by private and government agencies such as the Singapore Tourism Board and Contact Singapore.
In total, 14 government agencies and numerous private organisations are involved in this concerted marketing effort for Singapore.
Dr Lee hopes to connect with the Chinese through this multi-faceted presentation and pave the way for many more collaborations between the two countries.
So far, 12 agreements have been inked in the media sector alone, including one between Singapore's Media Development Authority and China's State Administration of Radio, Film and Television.
The Singapore Art Museum and the National Art Museum of China also signed an agreement to hold joint exhibitions as well as other exchanges.
Wednesday, October 10, 2007
CapitaLand’s service apartment arm Ascott Group yesterday launched a China-focused private equity investment fund with a target size of US$300-500 mil
CapitaLand’s service apartment arm Ascott Group yesterday launched a China-focused private equity investment fund with a target size of US$300-500 million.
Ascott said it intends to hold at least 30 per cent of the closed-end Ascott Residence (China) Incubator Fund, subject to a maximum of US$200 million.
‘The fund will seek to maximise total returns on capital by acquiring and repositioning suitable properties or developing greenfield sites into properties which are used, or predominantly used, for service residences or rental housing,’ it said.
Completed projects will be managed by the group’s brands until operations stabilise and yields from the properties are ‘attractive for divestment to other entities for profit’.
Ascott plans to inject three residential properties totalling up to US$102.1 million into the fund to seed it. These properties are Citadines Shanghai Biyun, Citadines Xi’an Central and Somerset Youyi in Tianjin.
The fund will be placed out to institutions and rich investors. Fund-raising is expected to close by the second quarter of 2007.
Ascott said yesterday its net profit for the first quarter ended March 31, 2007 was $9.7 million versus $42.32 million a year ago - because earnings in Q1 2006 included a divestment gain of $40.5 million from the injection of 12 properties into Ascott Residence Trust.
Net profit a year ago was also restated to take into account the retrospective adoption of new accounting policy for its service residences this year.
In the latest Q1, revenue fell 11 per cent to $95.08 million from $106.54 million a year ago. Excluding the 2006 divestment, revenue for Q1 2007 would have increased 25 per cent from Q1 2006. Ascott expects to book a net gain of about $22.2 million from the sale of Hotel Asia for $147 million cash in Q3 2007.
It will continue to buy and incubate properties to build a strong pipeline. And it expects higher fee-based income from new service residence management contracts and Reit management fees.
Portfolio gains and operating performance in 2007 are expected ‘to remain strong and profitable’, it says.
Ascott said it intends to hold at least 30 per cent of the closed-end Ascott Residence (China) Incubator Fund, subject to a maximum of US$200 million.
‘The fund will seek to maximise total returns on capital by acquiring and repositioning suitable properties or developing greenfield sites into properties which are used, or predominantly used, for service residences or rental housing,’ it said.
Completed projects will be managed by the group’s brands until operations stabilise and yields from the properties are ‘attractive for divestment to other entities for profit’.
Ascott plans to inject three residential properties totalling up to US$102.1 million into the fund to seed it. These properties are Citadines Shanghai Biyun, Citadines Xi’an Central and Somerset Youyi in Tianjin.
The fund will be placed out to institutions and rich investors. Fund-raising is expected to close by the second quarter of 2007.
Ascott said yesterday its net profit for the first quarter ended March 31, 2007 was $9.7 million versus $42.32 million a year ago - because earnings in Q1 2006 included a divestment gain of $40.5 million from the injection of 12 properties into Ascott Residence Trust.
Net profit a year ago was also restated to take into account the retrospective adoption of new accounting policy for its service residences this year.
In the latest Q1, revenue fell 11 per cent to $95.08 million from $106.54 million a year ago. Excluding the 2006 divestment, revenue for Q1 2007 would have increased 25 per cent from Q1 2006. Ascott expects to book a net gain of about $22.2 million from the sale of Hotel Asia for $147 million cash in Q3 2007.
It will continue to buy and incubate properties to build a strong pipeline. And it expects higher fee-based income from new service residence management contracts and Reit management fees.
Portfolio gains and operating performance in 2007 are expected ‘to remain strong and profitable’, it says.
Saturday, September 29, 2007
China's central bank raises growth forecast for 2008
China's central bank raises growth forecast for 2008
Economy may grow 11.6%; inflation seen rising by 5%
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(SHANGHAI) The People's Bank of China's research department raised its economic growth forecast and said inflation will probably accelerate.
High demand: The People's Bank of China has raised interest rates on some home mortgages and increased minimum down payments to cool property prices gains
The economy may grow 11.6 per cent this year, according to the report published in the China Securities Journal, faster than the agency's June estimate for a 10.8 per cent expansion. Inflation this year will rise by 5 per cent, up from 3.2 per cent forecast previously, and the trade surplus will widen to about US$250 billion this year, from US$177.5 billion in 2006.
The forecasts puts pressure on People's Bank of China governor Zhou Xiaochuan to raise lending and deposit rates for the sixth time this year to cap surging asset prices and cool the overheating economy. The bank on Thursday raised interest rates on some home mortgages and increased minimum down payments in an effort to cool property prices gains.
The government is concerned that a surge in lending is creating a bubble, which would drive up bad loans should it collapse. Investment in real-estate development jumped 29 per cent in the first eight months of this year. The statement also said the maximum mortgage for commercial property is half of its value, and the term can't exceed 10 years.
The decision by the central bank and the China Banking Regulatory Commission is 'to prevent credit risks and protect the borrower's repayment ability', according to the statement on the People's Bank of China website.
'It's clear they know they're behind the curve, in a hole, at risk of people taking more of their money out of bank deposits and going into other assets where there is already frothiness,' said Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics in Washington.
Until now, banks were barred from charging less than 90 per cent of the benchmark rates for mortgages. Interest rates on loans for first homes are unchanged.
China raised its one-year lending rate for the fifth time this year on Sept 14, to 7.29 per cent. Those increases have failed to damp demand for property as China's economic growth raises incomes and people prefer fixed assets amid inflation at a 10-year high of 6.5 per cent.
China's economy, the world's fourth largest, expanded 11.9 per cent in the second quarter from a year earlier, the fastest pace in more than 12 years.
The World Bank on Sept 12 raised its 2007 China growth forecast to 11.3 per cent from a May forecast of 10.4 per cent. -- Bloomberg
Economy may grow 11.6%; inflation seen rising by 5%
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(SHANGHAI) The People's Bank of China's research department raised its economic growth forecast and said inflation will probably accelerate.
High demand: The People's Bank of China has raised interest rates on some home mortgages and increased minimum down payments to cool property prices gains
The economy may grow 11.6 per cent this year, according to the report published in the China Securities Journal, faster than the agency's June estimate for a 10.8 per cent expansion. Inflation this year will rise by 5 per cent, up from 3.2 per cent forecast previously, and the trade surplus will widen to about US$250 billion this year, from US$177.5 billion in 2006.
The forecasts puts pressure on People's Bank of China governor Zhou Xiaochuan to raise lending and deposit rates for the sixth time this year to cap surging asset prices and cool the overheating economy. The bank on Thursday raised interest rates on some home mortgages and increased minimum down payments in an effort to cool property prices gains.
The government is concerned that a surge in lending is creating a bubble, which would drive up bad loans should it collapse. Investment in real-estate development jumped 29 per cent in the first eight months of this year. The statement also said the maximum mortgage for commercial property is half of its value, and the term can't exceed 10 years.
The decision by the central bank and the China Banking Regulatory Commission is 'to prevent credit risks and protect the borrower's repayment ability', according to the statement on the People's Bank of China website.
'It's clear they know they're behind the curve, in a hole, at risk of people taking more of their money out of bank deposits and going into other assets where there is already frothiness,' said Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics in Washington.
Until now, banks were barred from charging less than 90 per cent of the benchmark rates for mortgages. Interest rates on loans for first homes are unchanged.
China raised its one-year lending rate for the fifth time this year on Sept 14, to 7.29 per cent. Those increases have failed to damp demand for property as China's economic growth raises incomes and people prefer fixed assets amid inflation at a 10-year high of 6.5 per cent.
China's economy, the world's fourth largest, expanded 11.9 per cent in the second quarter from a year earlier, the fastest pace in more than 12 years.
The World Bank on Sept 12 raised its 2007 China growth forecast to 11.3 per cent from a May forecast of 10.4 per cent. -- Bloomberg
China tries to cool property market
(SHANGHAI) China has announced another package of measures to cool the country's red-hot property market, including raising the the down payment requirement for second homes to 40 per cent.
'Domestic property prices are rising quite fast and there are obviously irrational factors behind this,' the central bank and the China Banking Regulatory Commission said in a joint statement released late on Thursday.
The statement said commercial banks were facing 'significantly higher risks' and if property prices became too volatile, a surge in bad loans was likely to follow.
As part of the new measures, which take effect immediately, the down payment requirement for people buying a second home was raised to 40 per cent from 30 per cent.
The down payment required for commercial properties such as offices was also raised to 50 per cent from 40 per cent.
Further, mortgage rates for second homes and commercial properties must now be at least 1.1 times the benchmark lending rate, the statement said.
Previously the minimum was equal to the benchmark rate.
The statement said banks were banned from providing loans to developers that had been found hoarding land or houses, and that real estate vacant for more than three years must not be accepted as collateral for bank loans.
China has, since 2005, taken many steps, including interest rate hikes and imposing taxes, to curb rapidly rising real estate prices amid concerns of a dangerous bubble in the sector.
Interest rates have been hiked five times this year alone, most recently on Sept 15, with apparent little effect.
Property prices in 70 major cities across the country rose 8.2 per cent in August from a year earlier, the fastest so far this year, according to official data.
Property prices in Beijing were up 12.1 per cent in August year-on-year and 20.8 per cent in southern Shenzhen, a booming city just across the border from Hong Kong. -- AFP
'Domestic property prices are rising quite fast and there are obviously irrational factors behind this,' the central bank and the China Banking Regulatory Commission said in a joint statement released late on Thursday.
The statement said commercial banks were facing 'significantly higher risks' and if property prices became too volatile, a surge in bad loans was likely to follow.
As part of the new measures, which take effect immediately, the down payment requirement for people buying a second home was raised to 40 per cent from 30 per cent.
The down payment required for commercial properties such as offices was also raised to 50 per cent from 40 per cent.
Further, mortgage rates for second homes and commercial properties must now be at least 1.1 times the benchmark lending rate, the statement said.
Previously the minimum was equal to the benchmark rate.
The statement said banks were banned from providing loans to developers that had been found hoarding land or houses, and that real estate vacant for more than three years must not be accepted as collateral for bank loans.
China has, since 2005, taken many steps, including interest rate hikes and imposing taxes, to curb rapidly rising real estate prices amid concerns of a dangerous bubble in the sector.
Interest rates have been hiked five times this year alone, most recently on Sept 15, with apparent little effect.
Property prices in 70 major cities across the country rose 8.2 per cent in August from a year earlier, the fastest so far this year, according to official data.
Property prices in Beijing were up 12.1 per cent in August year-on-year and 20.8 per cent in southern Shenzhen, a booming city just across the border from Hong Kong. -- AFP
Agency likely to be called China Investment Corp (CIC), say reports
Agency likely to be called China Investment Corp (CIC), say reports
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(BEIJING) A government fund that is to invest part of China's US$1.3 trillion in foreign currency reserves is due to be officially launched tomorrow, according to news reports.
Close watch: Analysts are observing the agency's possible impact on financial markets
Financial analysts are watching the agency closely to see where it invests and its possible impact on financial markets. It is expected to be entrusted with US$200 billion, which would make it one of the world's richest investment funds.
The agency is likely to be called the China Investment Corp (CIC), Dow Jones Newswires and the Chinese newspaper Securities Journal reported yesterday. Both cited unidentified sources.
A Chinese official who was involved in setting up the fund said that he could not confirm the reports. Foreign reporters will be barred from the official opening ceremony, said Jesse Wang, chairman of state-owned Jianyin Investment Co.
Beijing created the fund in an effort to earn higher returns on its currency reserves, which have soared amid a boom in export revenues. A large portion of the reserves have been invested in safe but low-yielding US Treasuries.
Its creation comes at a time of tension with Washington over China's swelling trade surplus and unease in the US and elsewhere over Beijing's growing economic and military might.
Authorities said that the agency would be modelled in part on Singapore's Temasek Holdings, which invests in banks, real estate and other industries in China, India and elsewhere.
A key question has been the possible impact of the new strategy on the market for US Treasury securities.
Beijing is a big buyer of Treasuries, helping to finance the American government budget deficit. Chinese officials have given no details of how much money might be diverted to other assets.
The Chinese agency agreed in May to pay US$3 billion for just under 10 per cent of American investment firm Blackstone Group LP.
Mr Wang, who was involved in negotiating the Blackstone purchase, told The Associated Press in May that the Chinese agency was expected to try to avoid political strains abroad by purchasing minority stakes in companies rather than pursuing corporate takeovers.
Chinese companies have been uneasy about foreign acquisitions since the uproar in 2005 over state-owned oil company CNOOC Ltd's attempt to acquire US oil and gas producer Unocal Corp. CNOOC dropped its bid after American critics said that it might endanger energy security. -- AP
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(BEIJING) A government fund that is to invest part of China's US$1.3 trillion in foreign currency reserves is due to be officially launched tomorrow, according to news reports.
Close watch: Analysts are observing the agency's possible impact on financial markets
Financial analysts are watching the agency closely to see where it invests and its possible impact on financial markets. It is expected to be entrusted with US$200 billion, which would make it one of the world's richest investment funds.
The agency is likely to be called the China Investment Corp (CIC), Dow Jones Newswires and the Chinese newspaper Securities Journal reported yesterday. Both cited unidentified sources.
A Chinese official who was involved in setting up the fund said that he could not confirm the reports. Foreign reporters will be barred from the official opening ceremony, said Jesse Wang, chairman of state-owned Jianyin Investment Co.
Beijing created the fund in an effort to earn higher returns on its currency reserves, which have soared amid a boom in export revenues. A large portion of the reserves have been invested in safe but low-yielding US Treasuries.
Its creation comes at a time of tension with Washington over China's swelling trade surplus and unease in the US and elsewhere over Beijing's growing economic and military might.
Authorities said that the agency would be modelled in part on Singapore's Temasek Holdings, which invests in banks, real estate and other industries in China, India and elsewhere.
A key question has been the possible impact of the new strategy on the market for US Treasury securities.
Beijing is a big buyer of Treasuries, helping to finance the American government budget deficit. Chinese officials have given no details of how much money might be diverted to other assets.
The Chinese agency agreed in May to pay US$3 billion for just under 10 per cent of American investment firm Blackstone Group LP.
Mr Wang, who was involved in negotiating the Blackstone purchase, told The Associated Press in May that the Chinese agency was expected to try to avoid political strains abroad by purchasing minority stakes in companies rather than pursuing corporate takeovers.
Chinese companies have been uneasy about foreign acquisitions since the uproar in 2005 over state-owned oil company CNOOC Ltd's attempt to acquire US oil and gas producer Unocal Corp. CNOOC dropped its bid after American critics said that it might endanger energy security. -- AP
Monday, September 17, 2007
CHINA will need to implement further tightening, even after the fifth interest rate hike this year, to curb the fastest inflation since 1996
CHINA will need to implement further tightening, even after the fifth interest rate hike this year, to curb the fastest inflation since 1996 and dampen speculation in stocks and real estate, experts said.
‘The economy is really showing signs of overheating,’ said CFC Seymour strategist Dariusz Kowalczyk. ‘This makes China nervous enough to be more aggressive in its monetary policy.’
The benchmark one-year lending rate has increased to a nine-year high of 7.29 per cent from 7.02 per cent, with effect from last Saturday, the central bank said on its website.
A record trade surplus of US$161.8 billion (S$244.6 billion) in the first eight months of this year has flooded the economy with cash, pushing up consumer prices at twice the central bank’s target pace.
The benchmark CSI 300 Index for China’s yuan-denominated A shares has quadrupled in the past 12 months as investors sought better returns than those on offer at banks.
Home prices in cities have risen too, up by 8.2 per cent last month from a year earlier.
‘This is doing nothing to help stem the flow of money into the A-share market,’ said Societe Generale economist Glenn Maguire.
‘There’ll likely be one more move on lending rates this year. Deposit rates will also go up because, with inflation rising, real interest rates are negative.’
The central bank said it wants to strengthen monetary and credit controls, guide investment growth and stabilise inflation expectations.
The one-year deposit rate will rise to 3.87 per cent from 3.6 per cent.
Last Friday’s action on rates came after the statistics bureau said spending on factories, equipment and property had climbed 26.7 per cent in the eight months to August from a year earlier.
Soaring food costs also pushed inflation to 6.5 per cent in August, more than double the 3 per cent annual target set by the central bank.
‘We were too conservative and we are now bringing forward our forecasts,’ Standard Chartered economist Stephen Green wrote in a report after the bank’s decision. ‘We now think one more 27-basis-point hike this year and then another two in the first quarter.’
Source: BLOOMBERG NEWS (The Straits Times 17 Sept 07)
‘The economy is really showing signs of overheating,’ said CFC Seymour strategist Dariusz Kowalczyk. ‘This makes China nervous enough to be more aggressive in its monetary policy.’
The benchmark one-year lending rate has increased to a nine-year high of 7.29 per cent from 7.02 per cent, with effect from last Saturday, the central bank said on its website.
A record trade surplus of US$161.8 billion (S$244.6 billion) in the first eight months of this year has flooded the economy with cash, pushing up consumer prices at twice the central bank’s target pace.
The benchmark CSI 300 Index for China’s yuan-denominated A shares has quadrupled in the past 12 months as investors sought better returns than those on offer at banks.
Home prices in cities have risen too, up by 8.2 per cent last month from a year earlier.
‘This is doing nothing to help stem the flow of money into the A-share market,’ said Societe Generale economist Glenn Maguire.
‘There’ll likely be one more move on lending rates this year. Deposit rates will also go up because, with inflation rising, real interest rates are negative.’
The central bank said it wants to strengthen monetary and credit controls, guide investment growth and stabilise inflation expectations.
The one-year deposit rate will rise to 3.87 per cent from 3.6 per cent.
Last Friday’s action on rates came after the statistics bureau said spending on factories, equipment and property had climbed 26.7 per cent in the eight months to August from a year earlier.
Soaring food costs also pushed inflation to 6.5 per cent in August, more than double the 3 per cent annual target set by the central bank.
‘We were too conservative and we are now bringing forward our forecasts,’ Standard Chartered economist Stephen Green wrote in a report after the bank’s decision. ‘We now think one more 27-basis-point hike this year and then another two in the first quarter.’
Source: BLOOMBERG NEWS (The Straits Times 17 Sept 07)
Friday, September 14, 2007
Interest rate fears fuel 4.5% plunge in Shanghai market
Interest rate fears fuel 4.5% plunge in Shanghai market
(BEIJING) Soaring food prices propelled China’s annual consumer price inflation to 6.5 per cent in August, the fastest pace in nearly 11 years, cementing expectations the central bank will defy the global trend and keep raising interest rates.
The inflation rate published yesterday, up from 5.6 per cent in July, easily surpassed economists’ forecasts of 5.9 per cent. It was the highest reading since December 1996.
Shanghai stocks plunged 4.5 per cent, the biggest daily drop in two months, as investors fretted that higher borrowing costs could help bring the market’s dizzying rally to a halt.
‘Going forward we believe there are non-trivial risks that inflation may continue to edge up,’ economists at Goldman Sachs said in a note to clients. ‘We expect the central bank to respond to higher inflationary pressures with decisive tightening measures, including two interest rate hikes to the benchmark lending and deposit rates by the end of this year.’
China also reported a trade surplus for August of US$24.97 billion. It was the second-biggest on record but slightly lower than forecast as the ending of some tax rebates dented exports.
The ruling Communist Party, aware that inflation has touched off unrest in China down the ages, has voiced increasing concern about the speed of price rises.
A senior party researcher warned on Monday that inflation becomes difficult to control once it exceeds 5 per cent, while a local paper said Beijing had told schools and colleges in the capital not to raise canteen food prices as inflation climbs.
The National Bureau of Statistics said inflation was driven by an 18.2 per cent leap in the cost of food, which accounts for a third of the consumer price basket.
Meat prices rose 49 per cent in August from a year earlier, reflecting a shortage of pork, China’s staple meat.
China’s pig population has fallen 10 per cent due to blue-ear disease and reduced incentives to rear hogs, including fast-rising foodgrain costs and low prices last year.
China, the world’s biggest producer and consumer of pork, could quadruple its imports of the meat this year to 100,000 tonnes to ease the shortage, industry sources said yesterday.
To keep a lid on inflation and prevent the world’s fourth-largest economy from overheating, the central bank has raised interest rates four times this year and ordered banks on seven occasions to tie up more of their deposits in reserve.
As for the market plunge, analysts said that after more than doubling this year to last Thursday’s all-time high, the benchmark stock index might finally be starting a substantial pullback, even though they believe a full-fledged bear market remains very unlikely.
‘All the government policies will have a cumulative impact on the market - eventually, there will be a last straw on the camel’s back,’ said Liu Lifeng, fund manager at BOCI Securities.
Many traders think the market will in coming days slip to psychological support around 5,000 points.
A drop to technical support in the 4,700-4,800 area, where the index’s mid-August peak roughly coincides with the 38.2 per cent retracement of its rally since early July, also looks quite possible.
Source: Reuters (Business Times 12 Sept 07)
(BEIJING) Soaring food prices propelled China’s annual consumer price inflation to 6.5 per cent in August, the fastest pace in nearly 11 years, cementing expectations the central bank will defy the global trend and keep raising interest rates.
The inflation rate published yesterday, up from 5.6 per cent in July, easily surpassed economists’ forecasts of 5.9 per cent. It was the highest reading since December 1996.
Shanghai stocks plunged 4.5 per cent, the biggest daily drop in two months, as investors fretted that higher borrowing costs could help bring the market’s dizzying rally to a halt.
‘Going forward we believe there are non-trivial risks that inflation may continue to edge up,’ economists at Goldman Sachs said in a note to clients. ‘We expect the central bank to respond to higher inflationary pressures with decisive tightening measures, including two interest rate hikes to the benchmark lending and deposit rates by the end of this year.’
China also reported a trade surplus for August of US$24.97 billion. It was the second-biggest on record but slightly lower than forecast as the ending of some tax rebates dented exports.
The ruling Communist Party, aware that inflation has touched off unrest in China down the ages, has voiced increasing concern about the speed of price rises.
A senior party researcher warned on Monday that inflation becomes difficult to control once it exceeds 5 per cent, while a local paper said Beijing had told schools and colleges in the capital not to raise canteen food prices as inflation climbs.
The National Bureau of Statistics said inflation was driven by an 18.2 per cent leap in the cost of food, which accounts for a third of the consumer price basket.
Meat prices rose 49 per cent in August from a year earlier, reflecting a shortage of pork, China’s staple meat.
China’s pig population has fallen 10 per cent due to blue-ear disease and reduced incentives to rear hogs, including fast-rising foodgrain costs and low prices last year.
China, the world’s biggest producer and consumer of pork, could quadruple its imports of the meat this year to 100,000 tonnes to ease the shortage, industry sources said yesterday.
To keep a lid on inflation and prevent the world’s fourth-largest economy from overheating, the central bank has raised interest rates four times this year and ordered banks on seven occasions to tie up more of their deposits in reserve.
As for the market plunge, analysts said that after more than doubling this year to last Thursday’s all-time high, the benchmark stock index might finally be starting a substantial pullback, even though they believe a full-fledged bear market remains very unlikely.
‘All the government policies will have a cumulative impact on the market - eventually, there will be a last straw on the camel’s back,’ said Liu Lifeng, fund manager at BOCI Securities.
Many traders think the market will in coming days slip to psychological support around 5,000 points.
A drop to technical support in the 4,700-4,800 area, where the index’s mid-August peak roughly coincides with the 38.2 per cent retracement of its rally since early July, also looks quite possible.
Source: Reuters (Business Times 12 Sept 07)
THE People’s Bank of China (PBOC), China’s central bank, issued 151 billion yuan (S$30.6 billion) of directional bills to selected commercial banks
THE People’s Bank of China (PBOC), China’s central bank, issued 151 billion yuan (S$30.6 billion) of directional bills to selected commercial banks last week. Unlike the ordinary central bank bills distributed in the open market, PBOC made it compulsory for the commercial banks to purchase its tranche of directional bills.
This is the fifth time the central bank has wielded such a tool to restrain domestic banks from expanding credit too fast. While the term remains the same, the size of the current bill issuance is bigger than the previous four batches of 101 billion yuan.
Moreover, while the yields of the previous four batches of directional bills were only two to six basis points lower than normal central bank bills, the spread between the yield of the new batch and that of the ordinary ones widened to 10 basis points.
The issuance of directional bills came only one day after PBOC announced an increase in bank reserve ratio of 0.5 percentage points to 12.5 per cent, effective from Sept 25. It is the seventh time the central bank has increased the bank reserve ratio this year.
Contrary to general expectation, China’s economy didn’t slow in 2007. Instead, China’s economy has been accelerating despite a series of macro economic control measures.
In the first half of 2007, China’s GDP grew by 11.5 per cent, 0.6 percentage points higher than the same period in 2006. In particular, the investment growth remains at an uncomfortably high level.
In the first seven months, fixed asset investment in urban China grew by 26.6 per cent, which is partly driven by excess liquidity.
According to the central bank, M2, the broad measure of money supply, went up 18.48 per cent by the end of July 2007, over the same period last year. The growth rate is 1.42 percentage points higher than that of the end of June, indicating acceleration in money supply.
Currently, directional bills, bank reserve ratio requirements and interest rates are the three major instruments the PBOC uses to adjust liquidity in China’s financial market.
So far, PBOC has increased the interest rate four times within this year. Therefore the question we are left with is whether PBOC will increase the interest rate again this month after last week’s tightening move.
Usually, the decision of an interest rate hike is made at a weekend after major economic statistics, such as the consumer price index (CPI) and fixed asset investment in urban areas, are released by the National Statistics Bureau (NSB). According to the data release schedule, the next possible interest rate hike may be announced on Sept 14.
It does seem that the forthcoming August figure would trigger a new interest hike. It is widely expected August CPI will go beyond 6 per cent, provided food prices, the major drive for a high CPI rate, continue to pick up. The July figure hit a 33-month high to reach 5.6 per cent.
However, from a macroeconomic point of view, we reckon that even if a high CPI rate comes together with a high fixed asset investment figure, PBOC might not be in a rush for a new interest rate hike this month.
First of all, the high CPI rate might not be a bad thing in China. In fact, the CPI figure in July was less than one per cent, if food prices, which account for about one-third in the price basket, is excluded.
The food price surge will eventually benefit the farmers and help the country to narrow the widening income gap between the urban population and the rural one.
In the first half of 2007, net income of farmers grew by 13.3 per cent, which is a 20-year high.
Additionally, it is a common practice that Chinese banks extend loans much faster in the first half of one year.
Thus PBOC is under less pressure to control bank credit expansion in the second half.
Therefore, the current stronger-than-usual directional bill measure, together with a new bank reserve ratio hike, might allow PBOC more time to see the result of its actions.
Tiger Tong is an analyst with China Knowledge, a premier provider of trade and investment information on China
Source: Business Times 12 Sept 07
This is the fifth time the central bank has wielded such a tool to restrain domestic banks from expanding credit too fast. While the term remains the same, the size of the current bill issuance is bigger than the previous four batches of 101 billion yuan.
Moreover, while the yields of the previous four batches of directional bills were only two to six basis points lower than normal central bank bills, the spread between the yield of the new batch and that of the ordinary ones widened to 10 basis points.
The issuance of directional bills came only one day after PBOC announced an increase in bank reserve ratio of 0.5 percentage points to 12.5 per cent, effective from Sept 25. It is the seventh time the central bank has increased the bank reserve ratio this year.
Contrary to general expectation, China’s economy didn’t slow in 2007. Instead, China’s economy has been accelerating despite a series of macro economic control measures.
In the first half of 2007, China’s GDP grew by 11.5 per cent, 0.6 percentage points higher than the same period in 2006. In particular, the investment growth remains at an uncomfortably high level.
In the first seven months, fixed asset investment in urban China grew by 26.6 per cent, which is partly driven by excess liquidity.
According to the central bank, M2, the broad measure of money supply, went up 18.48 per cent by the end of July 2007, over the same period last year. The growth rate is 1.42 percentage points higher than that of the end of June, indicating acceleration in money supply.
Currently, directional bills, bank reserve ratio requirements and interest rates are the three major instruments the PBOC uses to adjust liquidity in China’s financial market.
So far, PBOC has increased the interest rate four times within this year. Therefore the question we are left with is whether PBOC will increase the interest rate again this month after last week’s tightening move.
Usually, the decision of an interest rate hike is made at a weekend after major economic statistics, such as the consumer price index (CPI) and fixed asset investment in urban areas, are released by the National Statistics Bureau (NSB). According to the data release schedule, the next possible interest rate hike may be announced on Sept 14.
It does seem that the forthcoming August figure would trigger a new interest hike. It is widely expected August CPI will go beyond 6 per cent, provided food prices, the major drive for a high CPI rate, continue to pick up. The July figure hit a 33-month high to reach 5.6 per cent.
However, from a macroeconomic point of view, we reckon that even if a high CPI rate comes together with a high fixed asset investment figure, PBOC might not be in a rush for a new interest rate hike this month.
First of all, the high CPI rate might not be a bad thing in China. In fact, the CPI figure in July was less than one per cent, if food prices, which account for about one-third in the price basket, is excluded.
The food price surge will eventually benefit the farmers and help the country to narrow the widening income gap between the urban population and the rural one.
In the first half of 2007, net income of farmers grew by 13.3 per cent, which is a 20-year high.
Additionally, it is a common practice that Chinese banks extend loans much faster in the first half of one year.
Thus PBOC is under less pressure to control bank credit expansion in the second half.
Therefore, the current stronger-than-usual directional bill measure, together with a new bank reserve ratio hike, might allow PBOC more time to see the result of its actions.
Tiger Tong is an analyst with China Knowledge, a premier provider of trade and investment information on China
Source: Business Times 12 Sept 07
Wednesday, August 1, 2007
Residential luxury An in-depth look at the current status of Shanghai high-end property market.
Residential luxury An in-depth look at the current status of Shanghai high-end property market.
by Colliers InternationalAdvertisement
An in-depth look at the current status of Shanghai high-end property market:
Economic Review
The latest statistical data shows that the Shanghai macro economy continues to keep fast and stable growth with its further structural optimisation. 2006 witnessed Gross Domestic Product (GDP) grow by 12%, 0.9 percentage points higher than 2005, and continuous double-digit growth for 15
consecutive years. On the other hand, the Consumer Price Index (CPI) rose by 1.2% YoY in 2006, 0.2 percentage points higher than 2005, which shows a modest inflation level. RMB loan balances of financial institutions in Shanghai rose by 11.5% in 2006 and the growth rate declined slightly over 2005, reflecting the control effect of credit expansion and over-liquidity. The Central Bank raised the one-year benchmark interest rate on loan by 0.27 percentage points, from 6.12% to 6.39% following the similar move in August 2006, which, together with the recent improvement of reserve
margins, are enhancing the effect of constrictive monetary policy and add the capital cost for both suppliers and demanders in residential market.
Under the impact of the enhancing real estate market control, the investment on residential development as well as residential sales are still stuck in a downturn. 2006 saw the total investment in the Shanghai residential market reach RMB83.56 billion, a drop of 9.3% YoY and the first drop for the past eight years. Residential sales reached RMB184.104 billion in 2006, down by 3.4% YoY, but a more modest decline than 2005. We expect the downturn situation will remain for
the short term.
2006 saw the residential price of the Shanghai market have modest stable growth, at 5.1% YoY. At the same time, the growth of per capita income continued to surpass that of residential prices, rising by 10.8% YoY. The per capita income is expected to grow fast and stably in the future, and thus will gradually absorb the effect of market overheating in previous years.
The actual Foreign Direct Investment (FDI) in Shanghai reached US$7.107 billon in 2006, rising by 3.8% YoY and a 0.9 percentage points’ fall in growth over 2005. On the other hand, the actual FDI in the tertiary industries rose by 26.2% YoY, accounting for 62.14% of the total, an 11 percentage
points rise over 2005. Therefore it is expected that the number of expatriates in Shanghai will keep growing, and still be the fundamental source of demand in the high-end luxury residential leasing market.
Market Conditions
Supply, Demand & Vacancy
Q1 2007 witnessed about 492 units launched into the market, all of which are serviced apartments. The most new supply are from two projects, Shama Luxe at Xintiandi in Luwan and The Crescent in Pudong, which opened up recently after being purchased and several months’ renovation by Gateway and Morgan Stanley respectively in 2006. There are no new luxury apartments and luxury villas coming into the market in this quarter. The net absorption in the luxury residential leasing market reached to 260 units and the vacancy rate rose by 0.7 percentage points QoQ and 3.9 percentage points YoY, to 17.97%.
From a sub-sector and district analysis, with the end of Christmas and the Lunar New Year holiday as well as the absorbing of luxury apartments launched last quarter, there are 231 units of luxury
apartments newly taken up, as a result, the vacancy rate dropped by 2.59 percentage points to 16.51%. Jingan saw the highest vacancy rate for luxury apartments at 22.95%, a drop of 7.7 percentage points YoY. However there are still plenty of vacant units from new projects released in Q4 2006. Changning saw the lowest vacancy rate at 8.09%.
The vacancy rate of the serviced apartment sector rose by 7.21 percentage points QoQ, at 23.46% in Q1 since many vacant units from new supply projects will take time to be absorbed. However, some mature markets without new supply, such as Changning and Xuhui just suffered from about one percentage point of vacancy rate change. Pudong had the highest vacancy rate for the serviced apartment sector at 50.33% as a result of newly-released leasable units from The Crescent this quarter. Xuhui saw the lowest vacancy rate at 9.61%.
Although there are no new supply projects in the luxury villa market this quarter, the outflow of some customers drove the vacancy rate to rise by 0.9 percentage points QoQ, at 13.96%. Furthermore, Pudong witnessed the highest at 18.4%, a 5.8 percentage points rise YoY; Minhang witnessed the lowest vacancy rate for villas, at 6.79%.
Rent Analysis
As a result of the slight drop of vacancy rate in the luxury apartment market, the average rent kept stable, just rising by 1.2% QoQ and levelled off with the same time last year, at US$ 17.52 per sq m per month. Additionally, Luwan saw the highest rent of luxury apartments at US$23.68 per sq m per month, while Huangpu saw the lowest at US$13.5 per sq m per month, but had the fastest YoY growth rate at 7.56%. However, Jingan continued to suffer from the sharpest YoY rental drop following last quarter, at 33.65% as a result of low rental units launched last quarter.
Due to some new low rental projects and weak season for short term leasing business, Q1 saw the average rent of the serviced apartment sector drop by 5.1% QoQ, to US$32.24 per sq m per month. However, the long term rental trend of serviced apartments keeps upward, rising by 1.2% YoY. Huangpu had the highest average rent of serviced apartments at US$45.03 per sq m per month, while Hongkou had the lowest at US$20.61 per sq m per month. Xuhui saw the highest YoY
growth rate of 13.12%. However, Changning suffered from the sharpest drop, by 8.77% YoY.
The slight rise of the vacancy rate of the luxury villa market drove the average rent to decline by 3% QoQ, at US$20.74 per sq m per month, but it rose by 1.6% YoY. Changning was listed top in average rent of villas, at US$21.92 per sq m per month, whiles Minhang was listed the lowest at US$18.17 per sq m. Pudong witnessed the highest growth rate at 12.8% YoY, followed by Minhang at 12.7% YoY, Changning saw the sharpest decline at 5.3%YoY.
The average rent of the overall residential leasing market reached US$ 20.89 per sq m per month, levelling off with last quarter and down by 1.65% YoY.
Capital Value & Rental Yield Analysis
The sales research on luxury residential shows that the policies are still affecting the market and the capital value of luxury residential in Q1 fell by 1.95% QoQ and 5.3% YoY, to US$3,831 per sq m. Furthermore, the capital values of luxury apartments, serviced apartments and luxury villas reached US$3,820 per sq m, US$4,447 per sq m and US$3,510 per sq m respectively.
The serviced apartment market has been attracting more attention from overseas investors when
Shanghai’s global business ties gets closer and foreign tourism booms. After several purchase cases by foreign investors last year, Morgan Stanley acquired 219 units from Novel City in Xujiahui CBD for US$67 million this quarter, which will be leased to the market as serviced apartments in 2007.
According to survey data from Colliers, the gross yield of luxury residential rose slightly by 0.1 percent points QoQ, at 6.5%. Furthermore, the gross yield of luxury apartments rose by 0.2 percentage points, at 5.5%, and that of luxury villas fell by 0.31 percent points QoQ to 7.09%, lastly that of serviced apartments reached 8.7%.
Market Outlook
2007 will see a stable Shanghai macro economic growth on the basis of its performance in 2006. FDI growth, however, will continue to slow down, but that of the tertiary industries will keep steady. Under this situation, the number of expatriates in Shanghai will continue to grow stably.
2007 will witness more new supply than 2006, totalling 3,438 units. The new supply of luxury apartments will rise slightly, totalling 1,974 units. But serviced apartments and luxury villas will contribute more new supply than 2006, totalling 989 units and 475 units respectively.
The vacancy rate of luxury apartments is expected to rise in 2007, and it will influence the average rent to drop by 13%-14% YoY. As a result of enhancement relative to the hotel business, both the rent and the vacancy rate of the serviced apartment market will rise. The luxury villa market will have 3-4 percentage points of vacancy rate rise due to more new supply in 2007, but even then the average rent will rise by 2%-3%.
The series of policies in 2006 and early this year suggest that the macro controlling climate will
surround the luxury residential market this year. The capital value will keep on declining by about 6% YoY.
by Colliers InternationalAdvertisement
An in-depth look at the current status of Shanghai high-end property market:
Economic Review
The latest statistical data shows that the Shanghai macro economy continues to keep fast and stable growth with its further structural optimisation. 2006 witnessed Gross Domestic Product (GDP) grow by 12%, 0.9 percentage points higher than 2005, and continuous double-digit growth for 15
consecutive years. On the other hand, the Consumer Price Index (CPI) rose by 1.2% YoY in 2006, 0.2 percentage points higher than 2005, which shows a modest inflation level. RMB loan balances of financial institutions in Shanghai rose by 11.5% in 2006 and the growth rate declined slightly over 2005, reflecting the control effect of credit expansion and over-liquidity. The Central Bank raised the one-year benchmark interest rate on loan by 0.27 percentage points, from 6.12% to 6.39% following the similar move in August 2006, which, together with the recent improvement of reserve
margins, are enhancing the effect of constrictive monetary policy and add the capital cost for both suppliers and demanders in residential market.
Under the impact of the enhancing real estate market control, the investment on residential development as well as residential sales are still stuck in a downturn. 2006 saw the total investment in the Shanghai residential market reach RMB83.56 billion, a drop of 9.3% YoY and the first drop for the past eight years. Residential sales reached RMB184.104 billion in 2006, down by 3.4% YoY, but a more modest decline than 2005. We expect the downturn situation will remain for
the short term.
2006 saw the residential price of the Shanghai market have modest stable growth, at 5.1% YoY. At the same time, the growth of per capita income continued to surpass that of residential prices, rising by 10.8% YoY. The per capita income is expected to grow fast and stably in the future, and thus will gradually absorb the effect of market overheating in previous years.
The actual Foreign Direct Investment (FDI) in Shanghai reached US$7.107 billon in 2006, rising by 3.8% YoY and a 0.9 percentage points’ fall in growth over 2005. On the other hand, the actual FDI in the tertiary industries rose by 26.2% YoY, accounting for 62.14% of the total, an 11 percentage
points rise over 2005. Therefore it is expected that the number of expatriates in Shanghai will keep growing, and still be the fundamental source of demand in the high-end luxury residential leasing market.
Market Conditions
Supply, Demand & Vacancy
Q1 2007 witnessed about 492 units launched into the market, all of which are serviced apartments. The most new supply are from two projects, Shama Luxe at Xintiandi in Luwan and The Crescent in Pudong, which opened up recently after being purchased and several months’ renovation by Gateway and Morgan Stanley respectively in 2006. There are no new luxury apartments and luxury villas coming into the market in this quarter. The net absorption in the luxury residential leasing market reached to 260 units and the vacancy rate rose by 0.7 percentage points QoQ and 3.9 percentage points YoY, to 17.97%.
From a sub-sector and district analysis, with the end of Christmas and the Lunar New Year holiday as well as the absorbing of luxury apartments launched last quarter, there are 231 units of luxury
apartments newly taken up, as a result, the vacancy rate dropped by 2.59 percentage points to 16.51%. Jingan saw the highest vacancy rate for luxury apartments at 22.95%, a drop of 7.7 percentage points YoY. However there are still plenty of vacant units from new projects released in Q4 2006. Changning saw the lowest vacancy rate at 8.09%.
The vacancy rate of the serviced apartment sector rose by 7.21 percentage points QoQ, at 23.46% in Q1 since many vacant units from new supply projects will take time to be absorbed. However, some mature markets without new supply, such as Changning and Xuhui just suffered from about one percentage point of vacancy rate change. Pudong had the highest vacancy rate for the serviced apartment sector at 50.33% as a result of newly-released leasable units from The Crescent this quarter. Xuhui saw the lowest vacancy rate at 9.61%.
Although there are no new supply projects in the luxury villa market this quarter, the outflow of some customers drove the vacancy rate to rise by 0.9 percentage points QoQ, at 13.96%. Furthermore, Pudong witnessed the highest at 18.4%, a 5.8 percentage points rise YoY; Minhang witnessed the lowest vacancy rate for villas, at 6.79%.
Rent Analysis
As a result of the slight drop of vacancy rate in the luxury apartment market, the average rent kept stable, just rising by 1.2% QoQ and levelled off with the same time last year, at US$ 17.52 per sq m per month. Additionally, Luwan saw the highest rent of luxury apartments at US$23.68 per sq m per month, while Huangpu saw the lowest at US$13.5 per sq m per month, but had the fastest YoY growth rate at 7.56%. However, Jingan continued to suffer from the sharpest YoY rental drop following last quarter, at 33.65% as a result of low rental units launched last quarter.
Due to some new low rental projects and weak season for short term leasing business, Q1 saw the average rent of the serviced apartment sector drop by 5.1% QoQ, to US$32.24 per sq m per month. However, the long term rental trend of serviced apartments keeps upward, rising by 1.2% YoY. Huangpu had the highest average rent of serviced apartments at US$45.03 per sq m per month, while Hongkou had the lowest at US$20.61 per sq m per month. Xuhui saw the highest YoY
growth rate of 13.12%. However, Changning suffered from the sharpest drop, by 8.77% YoY.
The slight rise of the vacancy rate of the luxury villa market drove the average rent to decline by 3% QoQ, at US$20.74 per sq m per month, but it rose by 1.6% YoY. Changning was listed top in average rent of villas, at US$21.92 per sq m per month, whiles Minhang was listed the lowest at US$18.17 per sq m. Pudong witnessed the highest growth rate at 12.8% YoY, followed by Minhang at 12.7% YoY, Changning saw the sharpest decline at 5.3%YoY.
The average rent of the overall residential leasing market reached US$ 20.89 per sq m per month, levelling off with last quarter and down by 1.65% YoY.
Capital Value & Rental Yield Analysis
The sales research on luxury residential shows that the policies are still affecting the market and the capital value of luxury residential in Q1 fell by 1.95% QoQ and 5.3% YoY, to US$3,831 per sq m. Furthermore, the capital values of luxury apartments, serviced apartments and luxury villas reached US$3,820 per sq m, US$4,447 per sq m and US$3,510 per sq m respectively.
The serviced apartment market has been attracting more attention from overseas investors when
Shanghai’s global business ties gets closer and foreign tourism booms. After several purchase cases by foreign investors last year, Morgan Stanley acquired 219 units from Novel City in Xujiahui CBD for US$67 million this quarter, which will be leased to the market as serviced apartments in 2007.
According to survey data from Colliers, the gross yield of luxury residential rose slightly by 0.1 percent points QoQ, at 6.5%. Furthermore, the gross yield of luxury apartments rose by 0.2 percentage points, at 5.5%, and that of luxury villas fell by 0.31 percent points QoQ to 7.09%, lastly that of serviced apartments reached 8.7%.
Market Outlook
2007 will see a stable Shanghai macro economic growth on the basis of its performance in 2006. FDI growth, however, will continue to slow down, but that of the tertiary industries will keep steady. Under this situation, the number of expatriates in Shanghai will continue to grow stably.
2007 will witness more new supply than 2006, totalling 3,438 units. The new supply of luxury apartments will rise slightly, totalling 1,974 units. But serviced apartments and luxury villas will contribute more new supply than 2006, totalling 989 units and 475 units respectively.
The vacancy rate of luxury apartments is expected to rise in 2007, and it will influence the average rent to drop by 13%-14% YoY. As a result of enhancement relative to the hotel business, both the rent and the vacancy rate of the serviced apartment market will rise. The luxury villa market will have 3-4 percentage points of vacancy rate rise due to more new supply in 2007, but even then the average rent will rise by 2%-3%.
The series of policies in 2006 and early this year suggest that the macro controlling climate will
surround the luxury residential market this year. The capital value will keep on declining by about 6% YoY.
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