Archive for Real Estate
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!
Filed under: China Real Estate, International News, Market News, Shanghai Real Estate News | Economy, News, Property, Real Estate|No Comments
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.
Filed under: China Real Estate, Credit, Economy, General News, Market News, Market Theory | China, Opinion, Real Estate, Shanghai|2 Comments
You know when things are bad if one of China’s biggest luxury developers wants to get into the liquor market as a second business.
It might be relevant to them personally (since you gotta drown the sorrow of not selling any units with something hard), but it’s definitely nothing to do, even remotely with property.
According to Guandian.cn (chinese investment site focus on real estate), they’re seriously looking into the liquor business for two reasons.
1. It’s very profitable, and much more than the Real Estate property business is at the moment, and they see it as a solution to fill the gap for much needed revenue (credit bust anyone?).
2. And this latest comment just made me chuckle, not correct, laugh out loud; “It doesn’t cost much to do the liquor business, which could evolve into some kind of winery in the future, and that is somehow related to property developement as well”
from a company expert.
Now I’ve been here for almost 9 years, always in this business, and I see people successfully change careers and industries in months, and very often.
Yet, this is a huge, huge, developer, and I find entertaining, yet scary.
This to me, really makes a statement, that we’re pretty much screwed.
Whats next? Henessy XO Luxury Housing Developements?
Oh, and before I forget, Star River is also the luxury developer who just cust it’s prices for Star River Pudong by 30%.
Filed under: China Real Estate, Credit, Economy | China Property, Credit, Offbeat, Real Estate|No Comments
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.
http://www.bloomberg.com/news/2011-11-06/china-credit-squeeze-prompting-suicides-along-with-offer-to-sever-a-finger.html
Filed under: China Real Estate, Credit, Market News | China, Credit, Market, Real Estate|No Comments
Seems like it’s really us against you.
The big C seems to try everything possible to keep the ever rising real estate, property and land prices from continuing they’re relentless upwards sprint.
Investors, Developers, Banks and REIT’s seem to not getting the message, KKR and Sino Ocean Land just set up another Real Estate Investment Fund of 140 Million US dollars, nearly half of which will be invested in Sino Oceans Chaoyang developement.
Loans and Credits reached a new year over year high, despite 20% corporate interest rates, and requirement barriers set up to keep people from buying property they don’t need and just want for pure speculation.
Developers confidence doesn’t crack either, and new land deals are closed every few days.
Transaction volume has plummeted and places like Number one on Xinhua Road here haven’t sold a unit for months.
Where do we go from here?
The economy and property sector are so closely linked that I’m not able to make a prediction anymore.
Demand is still high, it’s just not coming from those you want it to. The Consumer.
In the meantime, a Beijing Tycoon wants to buy 0.3% of Iceland.
Filed under: China Real Estate | China, Investment Fund, Real Estate|No Comments
Hey, been more than a year since my Last Post here on Shanghai Real Estate.
Thank you for all your mails, and caring, I’m fine, and well.
Just been really busy, we developed lot’s of new places, Shplace has grown and hired loads of new great people,
we expanded our business focus in the Real Estate Section, developed a few new places, renovated, added Brands, and have also ventured into Shanghai’s Second Hand Car Market.
I could say we’ve done pretty well and hope that we have some positive influence on your life in Shanghai.
I’m going to try to post regularely here again, and give you the latest updates and my opinion on this funny, sad, happy, demanding, challenging and almost always crazy Real Estate Market in Shanghai.
I’m back,
The O.
Filed under: Me, Shanghai Real Estate News | Personal, Posts, Real Estate, Shanghai|No Comments
This is some worthy news, though things are still all gloomy, at least here in china, singers and actresses are splashing the cash again for their new homes.
Gigi Lai, the famous 28-year old actress who is the star of the HK Series “the gem of life” and “ultimate crime fighter” has spend an amazing 280 Million Rmb [plus extra costs] (41 Million US$) for her new Penthouse overlooking Hongkongs victoria harbor.
And Taiwanese actor, singer and pop icon Jay Chow has also gotten himself a new pad in Taipei, 260sqm for more than 70 Million Rmb.
Compared to those two, J.Lo’s new 2.05 Million US$ Apartment in Manhattan seem’s almost too cheap for the Latina Queen.
Filed under: Economy, General News, Rumors, Trends | Chinese Real Estate, Hongkong Real Estate, Real Estate, Rumors, Taipei Real Estate, World Real Estate News|2 Comments
Few days ago I was struck by this article in the new york times.
It’s about a few people’s stories who made downpayments of several hundred thousand dollars for developements that weren’t finished then.
Most of those represented 10% of the actual price.
Now that there is a credit crunch, those sweet 90% low interest mortgage deals are no more, many of them require 20% to 50% down nowadays (depending on junior and jumbo deals if I got that right).
So if you paid an initial 100′000 US$ down on a place that’s 1 Million in total you’d have to come up with at least another 100′000 US Dollars or you’re deposit will go up in smoke as the article states.
That’s pretty harsh, but from the article it seems fairly common.
Now, I can tell you, this would never happen in China. The government would rather have the developers give the houses away for free than face a horde of angry people (who are many), that just lost all their savings.
I’ve been really thinking about it, and it doesn’t seem like this is going to change anytime soon.
The Party is very people concious, actually a lot more than anywhere else in the world, and if you think about it, that’s a good thing, at least in the short term.
Policies are always going to favor the individual investor.
Because as long as they keep the bull running, who cares about anything else?
Filed under: General News, Trends | International News, Market Trends, North America, Real Estate, Thoughts, United States|No Comments
Alright, alright, I probably could have chosen a better title. thanks for letting me know.
A few days ago a long time customer of SHPlace called me to see if the rules changed again for foreigners loans and the limitations that were put in place when the market was red-hot.
He actually wanted to know whether the new law that was put into place late 08 that only requires 20% downpayment to buy a normal house is now also true for foreigners?
Or if they loosened the restriction of the property. (A normal house is no bigger than 80sqm, 2 bedrooms, and doesn’t cost more than 1.5 million at the time).
I didn’t think they changed that law, but I still had to consult other people.
I called a few of my friends at different companies and bankers to see if anyone heard something.
I was stunned by the responses, because they were all different, and nobody was really sure.
All these new regulations and laws, stimulus packages, taxes that are no more are supposed to give buyers and sellers confidence in the market.
I’d say with the confusion exactly the opposite was achieved.
What could the solution be? A hotline, (well, that one actually exists, but you get handed from one person to another so many times that asking your question to the right person is already a science. For those that want to try, 58881688, if you’re outside of Shanghai Dial 021 first). Oh, and did I forget to mention that each districts has certain new rules that just apply to them too?
Obviously, all new regs are very well thought through, and with the best intentions. The City Government has shown us again and again that they’re up to the task.
The problem here are not the regulations, but the communication of them.
My 2 Cents;
I think a simple site, and one hotline, with one person that knows it all on the other side could take buyer and seller confidence a long way.
Filed under: Market Theory, Rumors, Shanghai Real Estate News, Trends | New Laws, Real Estate, Rumors, Shanghai Market, Theory|No Comments
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