China Real Estate News

China’s slowing GDP

2012-04-16T12:22:00.000+03:00

The main reason why the Chinese slowdown does not scare pundits more is that they expect China to repeat its past actions by loosening its monetary policy and stimulating its economy as it did in 2009

China is slowing. Its (gross domestic product) GDP growth rate has fallen to 8.1%. Not to worry. Forecasters everywhere are more than confident that the Chinese can stimulate the economy if things start to get bad. This might be true if China was a normal economy, but its strengths can quickly turn into weaknesses. The reality is that they have the wolf by the ears and there might be no way out.

In its latest forecast the World Bank has cut its forecast for China from 8.4% to 8.2%. While this growth rate seems enviable, it is a 13-year low. The Bank also forecasts that the Chinese economy, after a soft landing, will bounce back by the third quarter of 2012. The recovery’s shape would be somewhere between a vigorous ‘V’ and a flat ‘L’. The World Bank also forecast in June 2008 that the US would grow at 1.1%, Europe would grow at 1.9% and China would continue its growth of 9.4%. It also predicted in 2008 that a slowdown in the US would have little effect on China. It was wrong, very, very wrong.

The World Bank’s forecast has lots of support. A recent poll of 15 economists produced a median forecast of 8.3% while the Asian Development Bank (ADB) came in a little higher at 8.5%. Like the World Bank, the ADB’s forecast has been lowered from their report in December.

But it is not just the economic boffins who are forecasting slower Chinese growth. There is evidence from the real world as well. The most telling has to do with commodities. Over the past two years commodities seemed tied to equities. This has changed recently. World stock indices rose more than 11% in the first quarter while the Reuters-Jefferies CRB commodity index stalled, up only 0.2 %. This was reflected in Morgan Stanley’s index of commodity producers whose shares lagged behind other sectors and gained only 4%. The sluggish growth was no doubt due to falling demand from China.

Real estate construction accounts for 13% of China’s economic growth, but the sector is also slowing. Sales transactions in Beijing, Shanghai and Shenzhen are about 30% below levels last December. Investment in property construction growth was up 12% of the previous year in December, but that was half the growth in November. Developers have up to two years’ worth of supply on their books and there are an estimated 10 million to 65 million unoccupied apartments in China.

Real Estate Drags on China Growth, Domestic Consumption Is Bright Spot

2012-04-14T10:27:00.000+03:00

Growth in China’s gross domestic product slowed to 8.1% year-on-year in the first quarter of 2012, the country’s lowest rate of economic growth since the first quarter of 2009. On a quarter-on-quarter basis the picture was even worse, with annualized growth dipping to 7.4% from 7.8%, below the government’s 7.5% target for the year.

There was better news on the composition of growth. Responding to a question from China Real Time, National Bureau of Statistics spokesman Sheng Laiyun revealed that consumption spending by households and government contributed an impressive 76% of first quarter growth, up from an average of 41.6% in the last decade.

Real estate was the main domestic drag. The government’s continued efforts to tame bubbly house prices triggered a contraction in sales and new construction of residential property, with the impact rippling across China’s industrial sector.

Affects Of A China Real Estate Crash

2012-04-13T16:42:00.000+03:00

You've probably heard many opinions that Chinese real estate is in a bubble. However, much of the prognostication has been backed by hearsay and speculation. Below, I go beyond the hypothetical by illustrating the hard data that demonstrates that Chinese real estate is in a bubble. I will go further by anticipating how investors could potentially profit from the collapse of Chinese real estate bubble.

Most investors value residential real estate using a variety of measures. These include: price-to-incomes, price-to-rents and affordability. Essentially, people buy homes when they can afford the monthly payments.

Comparable sales are also often used, but I think this is the weakest form of property valuation. Arguing an asset is worth $x because a similar asset sold for a $x suffers from pro-cyclicality and becomes a self-fulfilling prophecy.

The first three charts below compare property valuations in the US with those in China and a selection of Chinese cities. According to three measures (price-to-incomes, price-to-rents, mortgage affordability) Chinese real estate is vastly overvalued relative to US housing.

The Chinese housing bubble may already be imploding. Assuming declining home prices drag the Chinese banking sector with it (and with the banking sector, local governments and the credit expansion fueling the Chinese fixed asset investment boom deriving Chinese economic growth) broad-based China-related ETFs, such as iShares FTSE China 25 Index ETF (FXI) or iShares MSCI Hong Kong Index Fund (EWH) could decline in value.

China property market digest, March 19-30

2012-04-01T00:38:00.000+03:00

(Reuters) - Here is a look at the latest news, numbers and more from China's real estate market.
The property sector accounts for 13 percent of China's gross domestic product in 2011.

In response to soaring prices, Beijing has rolled out an array of measures since late 2009 to rein in property speculation and has won some success. House prices have fallen from record highs.

But China's vows to keep its property curbs in place have fuelled worries that they may further drag on an economy that is already cooling, and saddle with banks with more bad loans.

March 28 - Chinese developer Evergrande Real Estate said its 2011 net profit climbed 50 percent from a year earlier to 11.4 billion yuan ($1.8 billion) and will keep a sales target of 80 billion yuan for 2012.

March 20 - Guangzhou R&F said its 2011 net profit rose 11.3 percent to 4.8 billion yuan and set a sales target of 32 billion yuan for 2012.
Read more

Xinyuan Real Estate Co., Ltd. Receives Achievement

2012-03-30T17:33:00.000+03:00

BEIJING, March 28, 2012 -- /PRNewswire-Asia/ -- Xinyuan Real Estate Co., Ltd. (NYSE: XIN), a residential real estate developer with a focus on high growth, strategic Tier II & III cities in China, today announced that it has received two awards from a Chinese study group composed of three institutions including the Enterprise Research Institute of the Development Research Center of the State Council, the Institute of Real Estate Studies of Tsinghua University and the China Index Academy. The Company was recognized as a Top 100 China Real Estate Developer and a Top 10 Real Estate Developer measured by operating efficiency.

The criteria for these awards was based on real estate developers' scale, profitability, growth potential, financial stability, financing capability, operating efficiency, and social responsibility among other factors. Xinyuan was ranked 40th out of 100 among Top 100 Chinese Real Estate Developers and 6th out of 10 among Top 10 Chinese Real Estate Developers measured by operating efficiency.

China house prices rise, but momentum cools

2011-05-18T16:58:00.000+03:00

Of 70 cities tracked in the survey, 56 reported gains in new home prices. That compared to a more modest performance in March that saw prices in 49 cities rising month-on-month.

New home prices in Beijing were up 0.1% in April from the prior month, while Shanghai reported a 0.3% rise, according to reports citing the National Bureau of Statistics data.

Guangzhou, the capital China’s southern Guangdong province, and Shenzhen, a fast-growing metropolis that lies just outside Hong Kong, each saw prices rises 0.7%.

Chinese millionaires are younger than their American counterparts

2011-05-15T15:23:00.000+03:00

According Hurun, the average Chinese millionaire is 39 years old, a full 15 years younger than your average millionaire in the US. There’s around 960,000 millionaires in China, a land of 1.4 billion inhabitants. And while China is a central planned economy and pragmatically socialist, 55% of the country’s millionaires are making money the old fashioned way — they earned it in private business. Another 20% have entered the world of China millionaire stardom through the country’s hot real estate market, and another 15% or stock market gurus, Hurun said in the executive summary to its May 12 report. More surprisingly, 30% of China’s millionaires were women.

China has gone through radical economic changes since the late 1970s when economic reforms began. The country tried its own communist brand of capitalism and over the last decade has grown by more than 9% on average, taking millions of Chinese nationals out of poverty, and millions more into the middle classes. Thousands of Chinese became millionaires in the last few years alone.

China Real Estate Market Due For Correction: Minister

2010-07-05T20:45:00.001+03:00

BEIJING (Nikkei)--China's real estate market may begin a full-scale correction within three months, Minister of Land and Resources Xu Shaoshi said Sunday.

According to the China News Service, the minister cited the recent plunge in the country's real estate sales volume as evidence.

Wary of a possible real estate bubble, Beijing has hammered out a series of policies to discourage speculative real estate purchases, including the introduction in April of new mortgage rules.

In May, the total land area sold declined 15.8% from the previous month.

Real estate prices remain high for now, but "prices will probably fall to some extent," Xu said, adding, "At present, I cannot make any prediction" as to how much they might decline.

China Real Estate Market Due For Correction: Minister

2010-07-05T20:45:00.000+03:00

China's real estate bubble, a heated debate

2010-01-14T22:56:00.000+02:00

by Xinhua writers Chen Yongrong, Zhang Zhengfu and Wang Lili

BEIJING, Jan. 14 (Xinhua) -- Despite a promising economic outlook, China still has some problems in its economy, and one of them is surging home prices.

Over the past month the government has rolled out measures to curb soaring property prices and stop speculation, but they would take time to work, according to economists and industry insiders.

HEADING FOR CRASH?

A recent New York Times story sternly warned that China's economy was headed for a crash, citing James S. Chanos, a Wall Street hedge fund investor.

"Its (China's) surging real estate sector, buoyed by a flood of speculative capital, looks like 'Dubai times 1,000 -- or worse'," said Chanos.

Wang Xiaoguang, a researcher with the Chinese Academy of Governance, said nobody would believe China's property market did not have bubbles.

China Curbs Loan Commissions

2010-01-13T22:27:00.001+02:00

SHANGHAI—China has told banks to stop giving commissions to real-estate agents for introducing mortgage customers, as Beijing tries to rein in an overheated property market and unscrupulous lending practices.

The warning from a banking industry association came after an unexpected decision by the central bank to tighten the reserve requirement for commercial lenders, a move aimed at curbing loan growth amid mounting concerns over inflation and a broad-based asset bubble.

View Full Image
CPROP
Reuters

A statue of Mao Zedong stands before a residential construction site in Taiyuan, Shanxi province.
CPROP
CPROP

The China Banking Association said Wednesday that the new guideline on housing-loan commissions has been in effect since Jan. 1. The association, which is under the directive of China's banking regulator, didn't specify whether banks that ignore the guideline would be penalized.

"High commissions paid by banks to real-estate agents have seriously disturbed the [financial and real-estate] markets and impacted banks' credit business," the association said in a statement.

Agents could receive commissions ranging from 1.2% to 1.5% of a home's value from banks, the state-run Shanghai Securities News reported, citing several agents.

The practice isn't unique to China but has raised concerns among regulators, as banks often lowered lending rates or relaxed lending practices to secure individual mortgage loans, a lucrative sector for lenders, while real-estate agents helped borrowers forge mortgage documents to get higher commissions.

China takes steps to shore up surging property market

2010-01-11T00:19:00.000+02:00

China ordered vigilance against foreign "hot money" flows and speculative real estate investment on Sunday in its latest expression of concern over a surging property market.

The order issued by the State Council, or Cabinet, called on authorities nationwide to take a range of measures to "promote the stable and healthy development of the real estate market".

Property prices have soared recently, bolstered by easy bank loans, tax breaks, and lower down-payments introduced by the government last year to support the real estate sector amid an economic slowdown.

The price gains have raised fears of a property bubble.

How a Chinese Real Estate Bust Could Hurt the U.S.

2010-01-09T11:27:00.002+02:00

hina and the U.S. are locked in a sort of economic mutually assured destruction, in which we need them to lend us money and they need us to buy their low-priced products. So if China's economy gets into trouble, the U.S. will feel the effects. That's why reports of a possible real estate bubble in China matter to people in the U.S. The evidence supporting the China bubble case is compelling, but the challenge is to figure out when the bubble will pop and how China will react.

Before looking at these questions, consider the evidence suggesting a Chinese real estate bubble. The New York Times reports that super-star short seller James Chanos -- who bet right on the collapse of Enron -- has now set his sites on China's real estate market. Chanos views China as "Dubai times 1,000 - or worse" and suspects that Beijing is faking its reports of 8% GDP growth, according to the New York Times.

China Sends Clear Signal on Bank Lending

2010-01-07T23:28:00.000+02:00

NEW YORK -- China's decision Thursday to raise the yield on its three-month bills sends a clear signal to the country's banks to avoid excessive lending in 2010.

By hiking the rate to 1.3684% from 1.3280%, the first increase in nearly five months, China emphasized its determination to tackle the fallout from the government's economic stimulus program that resulted in a massive surge in bank lending last year.

But despite a pessimistic reaction in some financial markets, it doesn't necessarily follow that an adjustment to a weekly money market operation means the government will suddenly tighten credit in the world's third-largest economy.

Specifically, China is telling its banks the central bank doesn't want to see an orgy of casual credit during the first months of the year in anticipation of tighter rules later on. It is also taking concrete steps to mop up some of the excess liquidity sloshing around its financial system because of indiscriminate lending in 2009.

Global Economy's Next Threat: China's Real Estate Bubble

2010-01-05T21:54:00.000+02:00

We might be tempted to envy China's spectacularly resilient real estate boom: After sagging in the global financial meltdown of 2008, property values in China's urban centers skyrocketed in 2009. Shanghai's Pudong district, for example, experienced a 57% rise in a matter of months.

By comparison, residential real estate in the U.S. is up 3.4% on average from its bottom in May, but still almost 30% below its peak in April 2006.

However, those admiring China's reflated housing bubble might be careful what they wish for, as the new real estate bubble in China is even more precarious than the one which imploded in 2008.

The popping of China's current housing bubble -- considered inevitable by regional experts such as Andy Xie -- could have widespread consequences. If housing turns down in China, China's growth could slow or even decline. And since the entire world is looking to China to lead global growth, then that could spell major trouble for the "global economy is recovering" story.

* STORY * VIDEO * China Property Stocks Drop Most Since August on Curbs

2010-01-03T21:24:00.000+02:00

By Bloomberg News

Dec. 18 (Bloomberg) -- China property stocks fell the most in four months, led by Poly Real Estate Group Co., on concern the government will step up measures to curb property speculation.

Poly Real Estate, China’s second-largest developer by market value, plunged 7.5 percent to 21.88 yuan, a ninth day of losses, after the government increased down payment requirements on land purchases. Gemdale Corp., the fourth largest, slid 7.8 percent to 13.20 yuan. The Shanghai property index slumped 5.4 percent, the most since Aug. 31.

Property stocks have slumped this week after the Xinhua News Agency reported the government will target “excessive” growth in property prices in some cities. That follows the cabinet’s statement last week that it will re-impose a sales tax on homes sold within five years, after cutting the period to two years in January.

“We’re at the start of an all-out crackdown on the property market,” said Wang Jia, an analyst at Industrial Securities Co. in Shanghai. “The current speed of gains in property prices cannot be sustained. Local governments may also work out their own policies targeting house prices.”

China Property Bubble May Lead to U.S.-Style Real Estate Slump

2009-12-31T10:31:00.000+02:00

Dec. 31 (Bloomberg) -- Li Nan has real estate fever. A 27- year-old steel trader at China Minmetals, a state-owned commodities company, Li lives with his parents in a cramped 700- square-foot apartment in west Beijing.

Li originally planned to buy his own place when he got married, but after watching Beijing real estate prices soar, he has been spending all his free time searching for an apartment. If he finds the right place -- preferably a two-bedroom in the historic Dongcheng quarter, near the city center -- he hopes to buy immediately. Act now, he figures, or live with Mom and Dad forever. In the last 12 months such apartments have doubled or tripled in price, to about $400 per square foot.

“This year they’ll be even higher,” says Li in the Jan. 11 issue of Bloomberg BusinessWeek.

Will the China property bubble pop?

2009-12-30T21:20:00.000+02:00

Beijing, China (CNN) -- When Crystal Zhang decided to buy a house last August, it seemed like a no-brainer.

For years, she had been spending a big chunk of her salary renting a studio apartment in Beijing, where she works as a mid-level executive in a multinational company. But her landlord kept hiking the rent, so she found a second-hand apartment and plunked 640,000 RMB (nearly US$100,000) as 52 percent down payment for a new home. She now lives in a cozy, one-bedroom flat and sets aside 25 percent of her monthly salary to pay for mortgage. "I hope to pay all up in five years," says Zhang. "By then I can start making some other investments."

China's Premier Pledges to Control Real Estate Bubble, Holds Firm on YuanBloomberg)— Chinese Premier Wen Jiabao said the government will cool property

2009-12-29T19:15:00.000+02:00

Bloomberg)— Chinese Premier Wen Jiabao said the government will cool property prices, resist pressure for the yuan to appreciate and keep inflation at "reasonable" levels.

"Property prices have risen too quickly in some areas and we should use taxes and loan interest rates to stabilize" them, Wen said yesterday in an online interview with the official Xinhua News Agency. China will "absolutely not yield" to calls for currency gains, he said.

China's property prices climbed last month at the quickest pace since July 2008, adding to concern that record lending and inflows of money will inflate asset bubbles in the world's fastest-growing major economy. Central bank adviser Fan Gang said Nov. 18 that the nation needs to be on alert for stock, real-estate and commodity bubbles as global capital flows into emerging economies.

China's Real Estate Bubble Remains a Hot Topic for 2010

2009-12-27T23:54:00.001+02:00

Two days ago, on Christmas Eve, I was back with Chris Gelken on China Radio International talking about the hot topic of recent weeks, whether there’s a bubble in country’s real estate sector — and if so, what to do about it. We covered some good ground in an hour-long discussion, and I highly suggest that anyone who has been following my blog posts on the subject might want to listen in by clicking here (and selecting the first hour).

Some of the more important points discussed include:

The main driver of mounting housing prices in China isn’t short-term speculation (“flipping”) but longer-term stockpiling of empty apartments as a “store of value,” like gold.

Property Bid Fires Real Estate

2009-12-26T10:10:00.001+02:00

China’s government may be splashing cold water on the nation’s property market but one buyer has just doused it with gasoline.

: Associated Press

A new national record price was paid this week for undeveloped land designated for residential use in Shanghai, prompting analysts to speculate the deal could singlehandedly underpin apartment prices in what is already one of the nation’s priciest and most closely watched real-estatemarkets.

Chinese Analyst Warns of Real Estate Crash

2009-12-25T14:06:00.000+02:00

In the wake of Dubai’s debt crisis, wary analysts are closely watching China’s real estate market for signs of a similar crash. Among the more pessimistic observers is Chinese commentator Shi Hanbing who warns China to prepare for the imminent burst of the real estate bubble.

In his December 18 blog post titled “China Should Prepare for a Real Estate Crash,” Shi compares China’s current situation to Japan before the disastrous crash in the early 1990’s, and identifies alarming similarities between the two economies.

Shi attributes the burst of the Japanese asset price bubble to three factors: speculation and over investment in real estate, excessive issuance of loans, and a population structure change. All three, according to Shi, are characteristic of today’s Chinese economy

chinese buy more cars than americans as their economy and real estate booms

2009-12-12T19:48:00.000+02:00

Although incomes still lag the West it is expected that China will be playing catch up with a 12 percent growth rate forecast. Furthermore the renmimbi is expected to revalue upwards against Western currencies which will increase consumer buying power and push up property prices for overseas buyers.

Indeed the booming economy is also helping to drive the real estate market.

The National Bureau of Statistics (NBS) reporting on Thursday said that Chinese property investment was up by 17.8 percent for the first 11 months of 2009 compared to the same period in 2008.

The NBS also said that property prices in its index of 70 cities rose by an annualised 5.7 percent in November, up from 3.9 percent in October.

When currency moves and demand led growth are considered, it is clear that Western investors in the Chinese real estate market are likely to see excellent capital gains denominated in their own currency.

Beijing looking to real estate as driver of economy

2009-12-08T08:59:00.000+02:00

China's leadership is unlikely to take big steps next year to rein in the nation's booming property market, as rising real estate values are seen as key to the development of a consumption-driven economy and backed by policy goals laid out for 2010, according to an analyst.

Deutsche Bank's chief economist for greater China, Jun Ma, said the annual meeting of the Central Economic Work Conference, which concluded Monday, left him with the impression that China welcomes further gains in real estate prices in the absence of an external driver for the economy.

Among the pro-consumption measures laid out, leaders said they would continue to extend support for first home buyers and those who are looking to upgrade

"This suggests that the government is not ready to take tough measures to cool off the real estate market before export growth recovers to a comfortable level," said Ma in a research note Tuesday.

China property sales may get boost before year end

2009-11-04T16:09:00.000+02:00

A year after China unveiled a powerful stimulus to encourage home buyers to take out mortgages in a troubled property market, real-estate sales may be getting a boost from concerns that the government will withdraw some of those measures by the end of the year.

Conversely, such concerns have pressured shares of Chinese property developers traded in Shanghai, Shenzhen and Hong Kong over the past few days and were continuing to weigh on them Tuesday.