Archive for China Real Estate
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
Filed under: China Real Estate, Credit, International News, Market News, Told you so | Capital, China Real Estate, Credit, Lending Markets, Told you so|No Comments
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.
Filed under: China Real Estate, Market News, Shanghai Real Estate News, Trends | Beijing, China Real Estate, News, Property News, Shanghai|No Comments
There was a real interesting article on Focus Shanghai recently, examining the new house supply in the city and the rapid consume recently.
According to DTZ Shanghai’s housing reserves are still feeding from new developements from 2006 and before.
The Real Estate Industry in China considers Housing Reserves as what is extra after what the market predicts will be consumed in 18 months.
From 2006 until now, Shanghai’s Reserves have been exactly 0 (spelled out zero).
The Research expects the reserves to be 0 and be mostly used up within the next three years.
Much of this the research pushes to foreigners, beginning to actually settle in the city.
After years of renting, affluent migrants, and expats are beginning to see Shanghai as their permanent home, hence the recent buying spree, after the recent slump last year many people started to pick up bargains and prices rose quickly again putting buyers under pressure to avoid ever rising higher prises.
Quite amazing, thinking of oversupply, being in this market. The bearish mood. The news from the western world.
But, also, the recently sold out Wellington Garden (after being a drag for 6 months), raising prices again after quickly lowering them last year.
The Casa Lakeville going like crazy and even the Tomson Riviera (China’s so called most expensive luxury housing) supposedly selling more than 20 units this year already.
Shanghai’s Real Estate market, something truly interesting to watch these days, the total makeover for the expo,
Expats really “settling” here, the new Jing An Temple Skyline, the tallest tower so far (Shanghai Center) and the 22 Line Metro Grid.
Filed under: China Real Estate, General News, Shanghai Real Estate News, Trends | China Real Estate, Real Estate News, Research, Shanghai Real Estate, Supply and Demand|No Comments
.. about shanghai’s real estate market on the great freakonomics blog.
It’s a guest post by Nathan Myhrvold former CTO of microsoft and founder of Inventing Company Intellectual Venture.
A few excerpts from the post
the reference goes to the movie The Graduate if I remember correctly
In one of the classic scenes in American cinema, young Benjamin Braddock is attending a cocktail party celebrating his graduation from college and entry into adult life. His internal reverie on his future is interrupted by Mr. McGuire, who says he has one word of advice for him. After a pregnant pause McGuire says, “Plastics!” Then he beams at the self-evident brilliance of this remark. Benjamin does not know what to say in reply.
A few years ago, I found myself at a cocktail party of business leaders when the C.E.O. of a major company came up to me, beside himself with excitement, and said, “I have the seen the future.” After a long and dramatic pause he delivered his answer: “China!” Like Benjamin, I was at a loss for words.
…..
the second-tallest building in the world — has a 105th-floor observation lounge with a glass floor looking down onto a giant hole in the building. It is spectacular…..
…Our Singapore office costs us $73: about the same as SWFC, but for a much less impressive building. Our Tokyo office is the worst at $96, and it is definitely second-tier. I don’t have an office in midtown Manhattan, but my broker tells me that those average about $88 per square foot per year. So the coolest, newest office space in Shanghai at the SWFC is about the same price as mid-range Singapore, and a bit cheaper than midtown.
We have no plans to open a office in Shanghai. Plus we’re cheap, so we’d never pick that building. However, I find it interesting that despite our frugal approach, we already pay 26 percent higher than SWFC in at least one place. Of course, all this proves is a rediscovery of the old real estate maxim: location, location, location.
If somebody says “this can’t last!” and predicts that the bubble will burst, they may be wrong for a while before they are right. What if they are wrong every year for nine years, and then it comes true in the tenth? How do you count that? Is that 100 percent success in predicting that it was a bubble or 90 percent failure because they missed it so many years?
It is a difficult question, because both answers have some merit. On one hand, pessimism and cynicism are almost too easy. The prediction “this won’t end well” has very little predictive value without a time scale attached, because eventually there are bound to be both good and bad events. It’s a bit like the line from the Bible that says, “There will be wars, and rumors of wars.” Well O.K., but don’t expect me to be all that impressed when the prediction comes true. It’s just too easy.
It’s a great post, I think you are most likely also going to like his Beijing Review here.
Filed under: China Real Estate, General News, Shanghai Real Estate News | China Real Estate, Market Opinion, Shanghai Real Estate|No Comments
This is just amazing, Sou Fun has recently started a registration of it’s Sou Fun VIP Card Members to collectively fly to the United states and buy up distressed real estate in Los Angeles, New York, Las Vegas, Long Island, San Francisco and Washington (all places were chosen because of higher chinese populations).
So Far, more than 300 people have registered, minium registration were 1 Million Rmb, or about 140′000 Rmb.
Sou Fun VIP has succesfully launched many “group buy” visits to places around China were it’s members bought up distressed real estate and got volume discounts.
During the last 2 days were the “Tuan Gou” (which means Group Buy) days hosted buy the card.
There is several organizations like these in China, and people love to buy loads of stuff together and get discounts, but I still think that this works so successfully in Real Estat is just amazing.
The latest numbers of the festival:
Day One, December 20th; 304 Units sold, more than a 100 Million Rmb worth of Chinese Real Estate divided into 20 different developements.
Day Two, December 21st (today) 252 Units sold so far (by 1pm local time).
Check out the pictures here
More than 2000 Members participated hunting for real estate bargains across the country.
Will it be the same for the U.S.?? What impact will they have?
Chinese have lot’s of savings, and their favorite way to spend money is buying real estate.
If Sou Fun can get this going there is quiet a chance that more companies will follow, organizing similar trips, taking inventory of the U.S. Market.
Filed under: China Real Estate, International News | China Real Estate, Chinese Investors, International Real Estate, Sou Fun VIP|No Comments
The Chinese Government announced several changes to current real estate rules today in an effort to “rescue” the slumping Real Estate market.
There are 5 significant Changes to the current system.
- The Current minimum downpayment requirement will drop to 20% from 30%
(during the go-go times the government issued the first downpayment rules, before it was 0-down)
- The commercial Tax Rule was lowered to 2 years from 5 years. (If an investor sold the property within 5 years, he or she had to pay a hefty tax of 5.55% of the whole sum).
- The Value added land Tax which used to be 5% of the profit has been suspended.
- The Deed Tax which was 3% for the whole country and 1.5% for Beijing and Shanghai has been lowered to 1% nationwide.
- The Public Labour Salary Loan’s maximum sum has been increased to 600′000 Rmb from 200′000 Rmb.
This thing, is very hard to explain, but I think you can sort of compare it to the US’s 401k plan.
(If you’re chinese, and you work in your hometown, or get paid in your home town, your company has to pay “public labour money” Gong Ji Jin in addition to your salary, you can take that money out, as long as you have a work contract and have the monthly “public labour money” pay back that cash.
The Interest Rates are about half of normal loans, thus making them very attractive.)
The chinese writing on the Boat in the image below means “Public Labour Money”
These are some very drastic measures all at once, alltogether there are 14 changes (the stamp-ink tax which was 0.05% was also suspended) which were announced today.
But to be fair, all these taxes where already a very harsh way to curb the market in the first place.
Think of it, 20% of your profit, 7.6% of the whole, in addition to several fees at the transaction office, 1% broker commission etc.
It’s a tidy sum of money, and one must be amazed how long people still managed to be bullish on property despite all these restrictions and fees.
What do you think? Will the new rules impact the real estate market in a positive way? Or not have an affect at all?
Filed under: China Real Estate, Market News, Shanghai Real Estate News | 2008 Real Estate Market, China Real Estate, Market News, Regulations, Shanghai Real Estate|No Comments
Seems that even in this turmoil there still are some good news out there for the Chinese Real Estate Market.
Merrill Lynch announced that it recently raised 2.65 Billion US Dollars to invest in asian Real Estate.
Attractive to the funds will be mainly commercial properties in Japan, China, India and South Korea.
The Company also said it is considering investements in south-east asia and australia if the price is interesting.
Tim Grady who is the managing director of the firms commercial real estate investment arm in Asia said:
“We see exceptional opportunities in Asian real estate over the medium and longer term,”
JP Morgan and Citigroup also announced funds of 1.3 Billion and 1 Billion US Dollars it plans to invest in Chinese and Indian Real Estate.
Though this is mainly a good event developers in China shouldn’t cheer to early.
Because of the low sales volume the Merrill Lynch and it’s competitors know that chinese real estate developers are starving for cash and financing and are therefore willing to give deep discounts to get rid of inventory.
If volume continues to fall in the coming weeks there will be quite a few large properties that an investor with sufficient cash can pick up for cheap.
They are also likely to hold out for a bit for the best deals.
Probably most of these attractive properties won’t pop out in Shanghai, since I only see some distressed sellers in the outer districts of developements with low margins, hardly anything that would fit in the portfolio of the investement banks that have until now mostly invested in up-scale luxury residential properties and downtown office towers.
Personally I’m looking forward to see what kind of deals will come out of it.
Filed under: China Real Estate, General News, International News, Market News | China Real Estate, Financial News, Market News, Real Estate News|1 Comment
The Danger of (Real Estate) hoarders.
Besides the economic slowdown, the slum in exports, and the likely decline in foreign investments (due to the financial mess in the western world) there is another real threat looming above Shanghai’s (and other top chinese citie’s) Real Estate Market.
It’s the Real Estate Investors that are directly connected to china’s exploding export market of the last decade.
I believe these hoarders are a major reason why real estate prices have taken such a significant fall in Shenzhen and Guangzhou.
During 2008 mroe than 30′000 Factories have shut down in Guangdong province alone, ten’s of thousands of people lost their jobs but as
harsh as it may sound it wasn’t as bad as their bosses becoming tight for cash.
As in Shanghai most Property investors are directly tight to the export business, a large number of them being the actual factory owners.
When those guys business started slowing and cash reserves were getting smaller by the day they had to tap other assets.
They switched into survival mode.
Because you can’t expect to sell your property anytime for a decent price within a day or two the factory owners had to lower prices.
The first couple of them probably got rid of their properties fast, giving them vital cash infusions to keep their businesses running.
But as the world economy’s state kept deteriorating the next wave of cheap price housing was just around the corner.
It’s important to understand that many of these guys have huge amounts of apartments if the numbers of shanghai factory owners are anything to go by.
Here, there is plenty of these guys that invested 100’s of millions of rmb in apartments, taking inventory of the market and in this way ‘inflated’ market prices.
Our customers alone that fit in this category of investors account for about 20% of the properties we manage.
Assuming these numbers were similar in Shenzhen and Guangzhou it’s easy to see how hey flooded the market with new properties, probably thousands of them.
Competing against themselves for vital cash to keep their factories running they kept slashing prices and putting more places on the market to get the cash they so
desperately needed to survive in this tough market.
Thus creating a deadly downward spiral that’s still going even now.
Worse, as seen in the news many first time buyers have since abandoned down payments they made for “to be finished” property developments in the city, and in this way are creating even more inventory.
I think these folks mainly impacted the Shenzhen and Guangzhou Real Estate Market because of their proximity to the cities.
Many of the Zhejiang and Jiangsu Factories are still running and making profits, this is why we probably haven’t seen the same declines here yet.
Though some “smaller” landlords have put their property on the market, these sales are mainly related to the stock market, people have lost a lot of cash, also borrowing to buy stocks and now have to tap other resources than their bank accounts to pay back the loans.
This is still a number and hadn’t had a large influence on the market yet.
Everything is still very, very stagnant right now, owners holding on, and buyers waiting out to see what’s coming next.
If, however, the world economy continues to deteriorate, it’s easy to tell that many factories, which are now still holding up are going to be in trouble around shanghai too.
Probably, these bosses too will look for a way to keep their business running until things get better.
Likely, they will sell their property as well, which could be thousands adding to the thousands of properties put on the market by the big developers this year that haven’t sold yet.
Shanghai tends to be a very emotional market, in all industries. If something works everybody’s in it, if it doesn’t all are fleeing in masses thus forming a base for market disasters as we had them so often already.
Is this going to be any different from the 2005 downturn?
That’s a tough one to call.
Because of two reasons.
- Prices were still a lot lower than they are right now.
Sort of giving a softening cushion to many recent buyers.
Most places have seen a significant increase of about 50% since the low that time.
- The inflated property prices of the time were mainly created by speculators.
The factory owners, weren’t going to sell, and most of them added a lot to their cost base at the time.
In one way, these guys are very savvy investors, buying at the low and aren’t panicking.
So speculators fled the market at the time.
Many of our colleagues were among them, many of us responsible for this mess.
I remember finding a cheap place for 500k, and selling it a month later for 800k. Paying back the loan and we were on to the next subject.
The guy who bought for 800k flipped the property another 2 months later for more than a million.
It’s not hard to see the parallels of the time then and the florida market a year or two ago.
China added many regulations, most of them loan related making it harder for speculators to acquire property.
Also it added the 5 year, 20% (of the profit) and 5% of the whole price rules which definitely put an end to the flipping.
What’s a good thing this time around, the speculators aren’t here anymore.
(They’re all agents now 
… irony..)
Prices didn’t double every three months for the last three years either.
They steadily increased little by little and I think are more closely demand related than they were back in 2003 to 2005.
And not all factories are going to go bust, if many at all around the eastern provinces that are more closely linked to the Shanghai Real Estate Market.
As in all theories, there is a lot of uncertainty, and I want to emphasize that I’m in general more pessimistic than many of my colleagues.
Only time will tell, but it’s clear that Shanghai’s Property market is going through a tough time right now.
Filed under: General News, Market News, Market Theory | China Real Estate, Market News, Market Theories, Shanghai Real Estate|3 Comments
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