SOHO China Won't Buy Overseas or Domestic Real Estate

Realty Today: Soho China Ltd. CEO Zhang Xin Goes Against the Flow, Won’t Invest in Overseas Real Estate Today

"Today when you go around Beijing and Shanghai, there aren't many plots of land still available. You don't see as many cranes. It's a very clear sign that it's a slowdown. The numbers support what you see. The numbers are also slowing down," Zhang said.

WSJ: Soho China CEO: I Wouldn’t Buy Overseas Real Estate Today

“Today, prices are so expensive. I wouldn’t be comfortable making any real estate investments in these major cities around the world,” she said.

“In China, at least in real estate, I know it’s not so crazy. But people are nervous about putting (their money) in real estate when the economy is going down,” said Ms. Zhang.

She added separately that her company is not interested in making further investments in land in China and would focus on leasing existing assets.

iFeng: SOHO中国决定停止楼市投资 中国和海外都不买了

China Opens Real Estate Market to Foreigners

Buying financial assets and property is now easier than ever, right at the moment most people want nothing to do with China, including wealthy Chinese. A great moment for contrarian investors is coming.

WSJ: The Verdict on China’s Easing of Foreign Property Rules? A Resounding ‘Meh’

While some countries are starting to put the brakes on the onslaught of foreign property investors, China is doing the opposite.

Beijing’s latest move to loosen restrictions for foreign investors and homebuyers in the Chinese property market could draw some attention to the lackluster sector, but it’s unlikely to help the country regain its crown as an investors’ darling.

The key factor driving both policies is Chinese home buyers.

China is easing foreign-exchange restrictions placed on foreign companies and individuals when they apply for loans and when they need to change yuan proceeds gained from the sale of a property, said a circular jointly issued by six government bodies, including the housing ministry, the trade ministry, the central bank and the foreign-exchange regulator.

It is also providing foreigners the same rights as locals on purchases of multiple homes, depending on each city’s purchase policies, according to the circular, which is dated Aug. 19 but was published Thursday.

The earlier rules on restricting foreign participation in the domestic property market are no longer relevant in the current environment, as China struggles to cope with its worst economic slowdown in decades. Concerns about capital flight, given the surprise yuan devaluation earlier this month, have also compelled policymakers to make policy U-turns.

The bottom isn't in for Chinese property and yields are still terrible in many cities (witness the implosion of SOHO China's stock), but there may soon be the chance to purchase currency depreciated property at great prices.

SOHO China Down 33% In Under 4 Months

A falling knife?

Or would you rather buy Wanda shares before they relist as A-shares? The firm promises to payout 20% of profits as dividends within 3 years of relisting.

Today, A-share market a pathetic state, namely the Green Group listed on the first day of fall 10.01 percent to 21.94 yuan sealed the daily limit, but Wanda executives still hope in August 18, 2016 the successful completion of Wanda return to A shares, and why this time Wanda shareholders fully support the return of A shares, which simply relies on two documents.

The first document is "Wanda dividend return planning the next three years," after the return of A shares, Wanda commitment is given three years to return to A-share annual cash distribution to shareholders of the realized profit of not less than Wanda distributable profit of 20% ; the second one is' within three years after the return of A shares Wanda stable company shares plan "provides the controlling shareholder of not less than 0.5% of the total share capital of the company, and not more than 1.5% of the total share capital of the company, stock price volatility encountered, the repurchase amount not less than 0.5% of the total share capital, which is institutionally maintained Wanda A shares of stability, a stable shareholder value.

EEO: 万达股东支持万达商业回归A股 发行数量不超过2.5亿股

Chinese Governments Get Serious About Bailouts and Growth

Over the weekend, two Chinese cities rolled out major policies to spur the economy and bailout the housing market.

The most important news comes from Fujian province. In Fuzhou, the city government is implementing one of the Ministry of Housing ideas for absorbing housing inventory, offering to buy empty houses from city residents. Homes between 45 and 135 sqm can be sold to the government at a discount of at least 15% from the market price.

The full impact of this policy is hard to predict. This is good news for lenders, since housing speculators can repay their loans, but the effect on the housing market is less clear. Once the government has the homes they will face pressure to generate cash flow. Renting them out will put downward pressure on rental prices and satisfy rental demand, potentially relieving some demand from home buyers. In high demand areas, the plan could bear dividends as former ghost cities are brought to life and increase overall demand. In less attractive areas (the under developed, uncompetitive fourth-tier cities), the government may achieve nothing except the concentration of risk on the municipal balance sheet.

iFeng: 福州统购市民余房 商品房价低于市场评估价15%以上

Hangzhou is offering subsidies of up to ￥1 million ($161,000) to highly skilled individuals who purchase a home, and they can also receive a ￥30,000 subsidy ($4800) on car purchases.

There are five classes of talent, from A to E. A top level A talent is a global talent. B is a national talent. C is a provincial talent. D is a municipal talent. E is for high level talent. The A class talent will be assessed individually, B class can receive the ￥1 million housing subsidy.

For example, for A class talent will take one person, one proposed solution to the housing problem; for B, C, Class D personnel there are ￥1 million, ￥800,000, ￥600,000 in housing subsidies; E class talent can receive ￥1200 / month rent subsidies.

Global entrepreneurs who launch innovative new companies can receive a ￥5 million subsidy, while a team of entrepreneurs can earn up to ￥20 million. A major groundbreaking project can receive up to a ￥100 million subsidy.

This policy is very aggressive and signals some concern about the economy, but it is a smart way to attract talent. On the plus side, Hangzhou, and Zhejiang province more broadly, is also friendly to private capital and entrepreneurship. This isn't an unfriendly, high tax, high regulation area trying to lure in businesses. It's a capitalist-friendly city looking to grow its way out of trouble.

iFeng: 杭州出台人才新政 买房政府最高补贴100万

The People's Daily days the housing market will not collapse, and will hopefully rebound in 2H 2015.

The current volatility of the property market in some people's eyes has been exaggerated as a prelude to the collapse. Experts believe that the real estate "crash," said to be worried over. On the one hand, there is still a lot of macro-economic development potential; on the other hand, the rigid requirements to support the property market will move. ICBC chairman Jiang Jianqing said the mainland Chinese real estate has always been a very strong demand, excessive inventory places may need to make adjustments, but after a period of time to adjust to reach a steady state of equilibrium, will not pose a significant risk.

"Historically, Japan and the US real estate bubble are generated in the urbanization rate has reached more than 75 percent, and economic growth is slow, but there is still room for development of urbanization in China, and the economy has maintained rapid growth, so the crash occurs unlikely. "Director of the National Development and Reform Commission reform and development of cities and small towns Tie Center said.

iFeng: 人民日报：中国楼市不会崩盘 下半年有望再回暖

Zhang Xin of SOHO China rebuts the urbanization drive. China property tycoon calls top of urbanisation drive

“By now, most of the cities in China are built,” she said on the fringes of the World Economic Forum in Davos. “Even small towns are quite built. So I think the intense urbanisation has come to an end.”

In the piece below, she sounds optimistic about the government's ability to manufacture GDP out of Chinese savings, but addressing Kaisa she says, "Instantly, the debt market is gone."


Finally, in other housing news, Beijing says affordable housing policy is history. Beijing started building affordable housing in the 1990s. The price was held at ￥4,000 per sqm and there were strict income restrictions on who could live there. After this year, all of the wait-listed families will be able to buy homes and the city will end the policy. Going forward, the city will help low income residents rent public housing.

iFeng：北京不再新建经适房 4000元经适房将成历史

Pan Shiyi: Market Still Adjusting

Summery: real estate not at the turning point, business isn't good this year, only IT firms are supporting the commercial rental market. SOHO is doing well, capturing the IT demand for rental space.

From iFeng: 潘石屹：市场还在调整中

The Smart Money Is Selling

In the middle of this article, Zhang Xin tells us exactly why credit bubbles grow and then why they pop: the cost of debt eventually exceeds the profit.

In Chinese Property, Smart Players Are Selling

More property developers are going abroad in search of fatter profit margins, according to Zhang Xin, Soho China's chief executive officer. At a forum this month, she highlighted the high cost of financing in China, saying that while rental returns from projects in Beijing and Shanghai are only 5%, interest on bank loans is 7%. "I lose 2%," she said.

She said that in Manhattan, the rental yield is 5% but the cost of financing is only 2%. In a private purchase last year, Ms. Zhang bought a stake in the General Motors building in Manhattan with a partner from Brazil.

Ms. Zhang said in an interview last month that the firm has cash totaling 22 billion yuan ready and waiting for a market correction. "We saw the first wave of credit crunch last summer," she said. "We already sensed that it is going to get worse and liquidity is going to dry up."

China Home Buyers Underwater; More Ghost Cities Emerge

Some homebuyers in China are finding the bids for their homes are below their cost. In the anecdotal cases cited in the article, people moving to a new city for work are finding their old homes are underwater.

房子接近成本价仍卖不出去 三四线楼市风暴难以避免 (Homes approach cost but still hard to sell, hard to avoid the storm in third and fourth-tier cities)

Recently, a few things happening around reporters do reference. Several friends a few years ago in Yangjiang, Guangdong, Shandong Weifang, Chengdu and other cities have been the work of home or bought a house, moved to Shenzhen think because wards, so this year intends to sell the house to the field. However, they also found that, after entering this house no longer marketable, even now these houses are close to the cost price in the sale, but did not sell three or four months to go. A friend told reporters yesterday, said that from the beginning to April, buyers view room even more low bids, the latest bid to buy a house has fallen below the cost of her. "Second and third tier cities in the house too much, I want to sell that house all newly opened several neighboring properties, and new homes compared to a small local second-hand housing simply no longer marketable, but also can not afford the price to sell. "the Friends say very worried about the local prices will barely, to the time the house will be "hit" in the hand.

Another message, SW recent research report shows that from the point of view of supply and demand than residential, north of Guangzhou-Shenzhen supply and demand than the four first-tier cities is 65%, which is relatively insufficient supply state of supply and demand than the second-tier cities is 116% , three or four lines of supply and demand than 125%, the national supply and demand ratio is 119%. Only from the point of view of supply and demand ratio, the relative lack of first-tier cities are still in the state, in other words, first-tier cities housing prices and perhaps some support factors. However, local supply and demand imbalance cities such as Yingkou, Ordos, Zhangjiajie supply and demand ratio reached 476.6%, 385.4%, 246.7%, storms of such property or the city will be difficult to avoid.

I did not know that housing supply exceeded demand in Yingkou by more than 400%. By some counts, there are now as many as 12 ghost cities.

辽宁营口也变“鬼城” 18万㎡小区零入住 (Yingkou, Liaoning becomes a Ghost City; 180,000 sqm of empty suburbs)

As night fell, located Minmetals Yingkou Coastal Industrial Base Howard Johnson Hotel podium lights, however, the room lights on top of the podium rate of less than one percent. The hotel is next to the one called "Laguna Lake Ming Ju," the real estate, the construction area of ​​about 180,000 square meters of residential areas has been completed, but the occupancy rate is still zero. Three project developers of this project Yingkou Tibetan Industry Group have developed an impasse.

This is the tip of the iceberg resulting from Yingkou's real estate "Great Leap Forward." "First Financial Daily" reporters found more in the future field visits in Yingkou, Evergrande (03333.HK), Kaisa (01638.HK), South Building (000961.SZ), Kerry (00683.HK), big room prices in local sales were encountered great difficulties, some small developers is more like years.

This quote from a cab driver sums it up:

"While looking at these real estate unoccupied, but in fact many of them have sold out." One taxi driver told reporters that "people rarely come to the coast, we went to this place is definitely not 'running the meter' because there are no return customers."

One reason for the over development is said to be the developers speed, which far exceeds the local government's development capabilities. However, there's also some cheap financing involved......:

A large number of investments in the Northeast developer told reporters: "For developers, a lot of sense to get cheap land reserves, not only being able to build a house, but also improve the overall valuation of the company, and then you can get a mortgage loans, which can in some way to explain why so many developers are willing influx of Yingkou. "

"The subject is difficult in a bubble aware of their dangerous situation, because the foam itself is a irrational exuberance." Associate Professor, Department of Investment and Insurance Huang Jianzhong Shanghai Normal University Business School on the "First Financial Daily" reporters, said, "ghost town "For the Chinese economy is dangerous" powder keg ", described as" the consequence of speculation, later suffer."

Speaking of the current market, commercially focused Soho China CEO Zhang Xin said the firm is "saving ammunition" and waiting for opportunities.

I recently (early April 2014) went through the SOHO Galaxy in Beijing. It is ever so slightly more occupied than it was last year, but it is still mostly vacant.

ZAHA’S NEW BEIJING BUBBLES

Galaxy Soho may be most beautiful at night, lit dramatically and glowing Beijing’s haze. But the night-time view also reveals a reality that neither the building’s owners nor Beijing’s government would like the world to know: it is almost completely empty. Despite official assurances that the city’s office vacancy rate is only 4%, the building’s lack of tenants suggests otherwise. Six months after its opening, Galaxy Soho's building manager, in moment of candour, told a Chinese real estate journal it had a 100% vacancy rate. When I walked through the building in October – one year after it opened – it was like a ghost town. The retail courtyard had just one lonely shop selling packaged ramen noodle and Pepsi. Behind Galaxy Soho’s aluminium and glass skin, there is nothing but air. So what are those four sensual towers - the gorgeous, shimmering symbols of Beijing’s real estate boom? They’re four giant bubbles.

Zaha Hadid's Galaxy SOHO

Since the grand opening ceremony on the 27th of October 2012, the Galaxy SOHO stands almost completely empty. Its square meter prices are constantly rising, and potential investors lose their interest. There are rumours that the Chinese development company SOHO is waiting to sell the commercial space for a better price. However, according to the information from the private investor who was interested in purchasing the offices there, the current square meter prices, combined with the real estate market fall, would not make the investment pay back in less than 10 years, making the commercial/office space and the entire building totally unattractive from the investors’ point of view. Moreover, the office spaces are criticized for being inflexible and too dark.

Chinese shares pummeled in Hong Kong

Investors are pricing in a much slower Chinese economy as disappointing economic numbers come in and today was the worst one-day decline in the past three months. The Hang Seng China Enterprises Index tracks H-shares in Hong Kong. Today, the HSCE was knocked for a 3.4% loss and was down as much as 3.7% late in the day. Beijing Capital International Airport (0694) was hit for a 7.1% loss. Jianxi Copper (0358) fell 6.0%; Sinofert (0297) lost 5.9%; China Minsheng Bank (1988) declined 6.2%; Sands China (1928) slid 4.9%; CITIC (6030) tumbled 5.7%; and Chow Tai Fook (1929) plunged 9.6%.

In the real estate sector, Sino-Ocean (3377) sank 7.5%; Guangzhou R&F (2777) fell 6.6%; China Resources Land (1109) declined 6.1%; SOHO China (0410) lost 4.1%. On the Mainland, Vanke (000002.SZ) fell 3.4%, well ahead of the 1.2% drop in the Shanghai Composite.

Real estate transactions and prices bounce in mid April; analysts turn pessimistic on 2nd half;

Optimists are again taking hold of some short-term positive data in Beijing. New home sales in the week ended April 20 were up 24.9% from corresponding week in March and 51.8% above year ago levels. Average price rose to ￥18794 per square meter from ￥18263 per sqm. Existing home sales fell 4.2% from March, but rose 7.3% from last year.北京郊区降价盘领跑4月楼市 成交量上升51%

A survey of 20 Chinese and foreign real estate analysts reports that they expect home price declines to reach 10% in the third quarter and that declines in the speculative cities will reach 20-30%. 分析机构认为未来三季度房价将下跌逾10%

Pan Shiyi of SOHO China (0410.HK) said that most developers aren't starving to death, but instead have gorged themselves to death. 破产开发商多数是撑死的

China real estate round-up: more than 1000 developers disappear from 3 major cities; Beijing GDP growth slows to 7%; SOHO China buys low

More than 1000 developers disappeared from Beijing, Wuhan and Chengdu last year. The data uses different dates for each city: Beijing as of December 2011, Wuhan October 2011 and Chengdu July 2011. If over 1000 firms disappeared last year and the market has grown tighter, the numbers will be much much bigger this year. The data comes from the number of firms that did not renew their business license.
武汉四川等地已有上千家房企消失

Beijing's 2012 Q1 GDP growth fell to 7%.
北京新建住宅价格连降5月 仍将继续回落

SOHO buys low. iFeng has a whole page of articles on SOHO's (0410.HK) purchase of Greentown's Shanghai project. As I have written earlier, large and well financed developers may offer value even as the market declines. As one headline puts it, SOHO China nabbed a project worth ￥15 billion for ￥2.1 billion. The value would have to collapse for the firm to lose on that deal. SOHO still has ￥12.5 billion in cash and are looking for more buys.
SOHO中国二度“抄底”绿城土地 Here's an English article on the buy: Beijing Real Estate Billionaire Couple Continues Brisk Expansion In Shanghai