Archive for Market News
Some interesting Reads I did this week;
Via Money Morning: China’s Real Estate Blindside could turn into a Real Buying and investment opportunity.
I usually do not follow outside opinions, because for china, looking at news, and research is basically useless.
It’s like reading the bible for a description of the universe (nothing against the bible, meaning you can’t get real facts about the other out of it), but this article seems well thought through.
Via Zerohedge: China Trade Surplus Unexpectedly Rises As Non-EU/US Imports Spike; Crude Imports Relentless
Via Shanghaiist: Canadian Housing Scammer Ryan Fedoruk’s exposed, but not caught.
Via WSJ: Chinese Real Estate Tycoon Sells Gold buys property
now this kid’s got balls.
Via Wall St. Pit: Is it going to be the Year of the Bull (Rogers) or the Bear (Chanos)
rooting for neither! I’m a rabbit!
Read an interesting article today on Business Insider by by Patrick Chovanec on the real estate downturn here in China that’s been coming more and more into the light in recent weeks.
He points out how everything is unraveling lately, and funny his first point is the Sanya, Hainan slump, which I’m not going to argue with, for everybody knowing me, knows that we burned our hands and I’m soon going Suicidal with our SHPlace Hainan Division’s business success (or better non-success).
The first couple of months in 2009 turned out amazing, we started with a small office of 5 people (which quicly grew to about 60) and we’re able to sell units everyday.
Property buyers made it a habit to bribe agents to get units (from a couple of 100k to 1 million rmb even),
and we in turn had to handover those bribes to the developers sales people when they made their pick who gets to buy this super exclusive piece of real estate.
Crazy enough, everybody bought cash, and no loans, as such was the custom in Sanya.
Then soon after, things started to slow, not at once, but in time.
Now, about 2 years later, it’s dead, nobody buys, people who bought aren’t selling, and developers cut prices like mad.
One of the hottest places we marketed has cut prices by 60% this year, and still, it’s hard to find takers.
One should have seen it coming at prices close to those in Shanghai’s hottest location.
Which brings me to the next point, Chovanec argues that it’s a natural downturn and that because the governments moves where started 2 years ago, they haven’t had a hand in it.
I totally agree it’s a bubble, in fact, I have said this since years ago, only to be always proven wrong (semi-wrong, I still think it’s a bubble) time and time again with new price highs.
Being on the floor (I think it’s the Wall Street Bankers term for it) here, we’ve seen and noticed the restrictions, in the beginning, not much changed, not nearly enough to make an impact.
Buying Restrictions are great in theory, but this is china, people always find a way to cross the river.
Nobody in the business I knew took it really seriously, and the few, first restrictions that were added in the beginning were a literal joke and too easy to overcome.
What makes me say the intervention (if it was intended to be in this scale or not I leave up to others to question) has worked is that they added slowly to the pot until the scale tipped.
From where I stand, what in the past year has really messed things up is the credit market, tightening has gotten worse, and more and more you can’t get a loan for that pad of yours.
And they have been quite busy taking more and more measures, because it isn’t easy to restrain this beast that is the chinese real estate market and it’s lending.
Shit hit the fan when developers have found it more difficult too to get access to credit as well, ( we all knew the game from before, “eine hand waescht die andere” but now banks had no money to lend to developers even if they wanted to).
At first this was offset by private lenders, at some point, at least now, that doesn’t seem to be an option anymore either for most.
And adding to that they can’t unload any of their properties because there are no buyers anymore you find yourself in a cash trap.
See this from a developers eye.
You commited to many more project, because you based your future on the ever going trend, profits and turnover were scandalous.
You buy more land, in many cases with requirements to build on it within a certain time frame to keep you from speculating (irony anyone?)
Now you bought this land financed, with only a little cash up front from your side, and the rest being lent, by banks, institutions and investors.
You count on completed development sales and in-developments pre-sales to give you the needed cash to mortgage yourself more and start building on this land.
You do worse then expected, but still, enough to at least get that shovel in the ground and lay base hoping for things to get better, well, actually,
you EXPECT it to get better, because this is china.
No way the big boys are going to let that horse who pulls their chariot (the economy and growth) run out of water…
Up until now, it looks like this is exactly what’s happening.
You see that they had enough, you kept going way to fast, and this expensive chariot seems to be so worn down, that if continuing at this speed, there will be a full out crash, and it will be beyond fixing.
You realize they tried to tell, slow the hell down boy, or we will, for the sakes of the people on the chariot, nobody listened and like any good roman would do, they take away your hooves so you’ll be in excrutiating pain to keep you from speeding into neverland.
Chinese Real Estate is not going away, and to me, until the 2012 leadership change, I don’t think anything super drastic can happen.
But slowly, they’re weeding out the over eager horses, the ones that pulled to fast ahead, and we’ll be left with fewer who will pull the chariot at a slower, more sustainable space.
Before that, pain.
There is another interesting point in the article, it’s the obvious reliance on local governments on land sales for their revenue.
According to the Article, Dalian’s revenue is down 50% Nanjing and Wuxi about 30% Wuhan Beijing and Shanghai are lingering around 15% from last year.
I’ve said this many times, this is actually a super big problem, which can be solved though.
I believe the chinese need more choices where they can invest their money.
China needed a Bond Market, not the crap that’s out there right now, but at least it’s slowly getting into place.
Something sophisticated where you can spot the cheaters easier because institutions will do their homework and ask questions for their own protection, not your friends who will turn an eye when you play with the numbers (just a little can’t hurt right?) because it’s in their best interest too.
Over the years working in Shanghai Real Estate I have dealt with hundreds of leasing and sales offices, some of them run by large corporates like CBRE, J Lasalle, Colliers, DTZ and the likes, and the other half run by the developers themselves.
In terms of sales, well the market was great, all did great, now however, the market is slugging, and you’ll really start to see who provides real skill and value to the table.
Ask Wharf who is trying to sell the No 1 Xinhua Rd managed and sold (trying to sell) together with CBRE but mainly by themselves.
Sold a third in the first week and zero in all the months after that.
I have been going to view commercial and residenntial prime real estate in Shanghai with customers and it’s incredible, how often they will be alienated by the sales department who don’t realize that their name implies their purpose.
Today I called Sun Hong Kai properties to inquire about their mall space, with a customer who has worldwide destinations and defines locations.
The Sales lady picked up the phone, said: “wei, wei, wei” and hung up after muttering some swear words (maybe she thought nobody else was on the line but hey I did hear everything.
Called two more times and have been shoved off because she is “busy”.
The same developer though at another project in Pudong made another customer of mine wait nearly 3 hours a fortnight ago and re-scheduled twice before that.
Needless to say they’re furious, and actually only waited up for the sales people to show up so they can yell at them.
Developers have to realize that even though you’re in a red hot location, you need anchor points in Shanghai to make and define a location.
It makes the difference between the K11 which will never be anything else but an underground food court, and the Grand Gateway Malls in Shanghai which are a destination because of Element Fresh, Da Marco, Wagas, Colabo etc.
You see the people who sold the initial places, and their dedication to customer service and sales which are interlinked and you understand.
Please dear Sun Hung Kai, outsource it to somebody who knows how to sell.
Shanghai Real Estates greatest friends and enemies, the Wenzhounese have been quite a lot in the news lately.
They probably single handedly created the boom and bust in 2005 here in Shanghai, by coming in groups and snapping up all the property available in Shanghai just to sit on them.
2008 was probably the last we seen of them here in Shanghai, or at least in this kind of mass and behaviour, most of them have exited and started the same scheme in second tier cities and Hainan.
Now it seems, something broke.
I don’t know if you’ve been following my twitter, no worries if you don’t.
But I mentioned that I’ve been seeing a lot of buddies of mine taking their collateral and snubbing the banks because they won’t feed they’re ever growing appetite for capital anymore.
They’re is an endless option for capital out there if you’re willing to pay the price (30% interest in some cases).
And just for your info, my twitter is shanghaiplace.
We’ll don’t wanna say told you so. But ya know….
The mainland’s four largest banks have been hammered by a big outflow of deposits that are ending up in private lending markets, the state-run China Securities Journal reported yesterday.
In the first 15 days of September, combined deposits at the big four plunged by 420 billion yuan (HK$512.7 billion) from the end of August.
Bank of China (3988) saw a drop of 180 billion yuan, while deposits at the Agricultural Bank of China (1288) fell by 140 billion yuan, the paper reported. No figures were given for ICBC (1398) or China Construction Bank (0939).
The sharp decline in deposits slowed down banks’ lending. New loans given by the big four amounted to only 87 billion yuan in the first half of September, versus 186.7 billion yuan for August.
“Amid high inflation and real negative real interest rate, clients prefer withdrawing their money out of the banks for loan-shark lending,” said Hu Yu, a Shenzhen-based analyst with Chinalion Securities.
Deposit rate in underground lending businesses in Wenzhou, Dongguan and Fuzhou are said have hit 36 percent a year – 10 times the benchmark one-year deposit rate of 3.5 percent.
Even state-owned firms such as China Mobile (0941) have set up a financial arm to venture into the loans business, while PetroChina (0857) already has a number of financial vehicles in place. Meanwhile, local fund manager Value Partners (0806) and jewelry retailer Man Sang International (0938) have started a microcredit business in the mainland. NATALLIE CAI
Soufun.com’s researched arm just published that sales in Beijing fell 19 percent in the first three quarters of the year and prices dropped an average of 10%.
In the meantime, Shanghai’s transactions (on paper) are down 5% yet prices rose 14% in the period from January 2011 to September.
Now, there is a way to cope with the rising real estate prices in China!
Become a Tencent (the guys behind QQ, QQ games, those funny card games you see your chinese colleagues play online, paipai.com and others) employee!
Tencent is offering interest free loans to employees that have been with the company for longer than 3 years, and it said to keep 1 Billion RMB on the side to just do this.
Employees will be able to borrow up to 300′000 Rmb per person.
China has been raising interest rates, and pushed up bank reserve minimums in the past months, to make it more difficult and less attractive to buy property in a try to slow this red hot market a little bit.
So far, with little success, as the appetite for property seems to only grow stronger and credit can be acquired for the right price anywhere.
Shanghai just keeps going and going, and going, it might be time that energizer lets go of it’s catch phrase and leaves it to our beloved real estate market.
According to reports, in March 2010 sales are up an astonishing 150% for storefronts and malls from february.
And 55% more than they were in march 2009.
There has been an increase in develepements, and the chinese new year holidays have certainly played a role, but this doesn’t keep me to still take a step back and glance at the numbers in awe.
The average price has increased 0.37% for march from february and is also up 48% from March 2009 and locked at 19767 Rmb per square meter average.
The city has seen a huge increase in investment style storefronts for sale in newly developed malls especially in the minhang and songjiang area, they’re often sold with tenants already waiting in line to take up the place and pay rent.
The hubs in the areas nearby major subway stops such as Xinzhuang and the new Songjiang stops have gotten a great boost in recent years thanks to the influx of people from the rural areas taking up jobs in the city and living in the more affordable areas nearby the subway stations.
According to China Daily and reports the offiicial home prices are up by 1.5% in 2009.
Are you serious?
I guess you can argue that prices fell and are up just a few points since 2008, but for 2009? A real boom year?
We had so much influx in new buyers we couldn’t find places fast enough, and in the year that downpayment speculators became big?
It seems highly unlikely, in 2009 the Lakeville’s 3rd Phase re-emerged, and so did several slow selling properties from 2008.
Even though few of them sold, prices were still cut significantly in 2008 and have bounced back an astonishing amount in 2009, to many in the industry.
A boom year.
Read the China Daily Article.
Ok, maybe I’m biased, it’s only Shanghai I know and have insight too.
But there is also hainan that was on the news.
Hangzhou, Suzhou and Chengdu have rebounded, and I find it hard to believe that this was a mere 1.5%.