Saturday, August 18, 2012

Rebound in China's property market?

BEIJING: There are signs of a turnaround in China's property market.

Home prices increased sequentially for the second straight month, reversing nine previous months of decline.

But developers are mindful that curbs on the residential property sector remain as they seek growth through retail and commercial property.

Hit by cooling measures, Chinese home prices have been on a broad downward trend for the past two years.

But average home prices in China's 100 major cities inched up 0.3 per cent last month on a month-on-month basis, according to data from the China Real Estate Index System.

The China Real Estate Index System (CREIS) is affiliated with China's largest online real estate company Soufun Holdings.

Analysts say CREIS data is watched by investors who believe it is better at foretelling property price trends than figures released by the government.

Capitaland, which has a 41 per cent exposure to China, said it increased prices and sales for its residential units in China in the second quarter.

China accounts for 41 per cent of Capitaland's total assets of S$13.6 billion as of June 30, 2012.

In western cities like Chengdu, Capitaland China Holdings said "sales volume in the second quarter increased by 43 per cent compared with the first quarter of this year, while prices rose 1.8 per cent".

It added "the property market is still in the early stage of development compared with many first tier cities."

Urbanisation rate in western China is less than the national average and demand is driven mainly by new family formation and upgraders.

On commercial properties, the company said there are few international grade A buildings and good shopping centres and it will be banking on growth from its malls in western China, which saw retail sales grow more than 20 per cent year-on-year in the first half.

CapitaMalls Asia's chief executive officer, Lim Beng Chee, said: "The minimum wages will increase. I think the government policy is to bridge the gap between the rich and the poor. To us, it is advantageous because our malls are targeted at the mid to upper segments of the population.

"So the moment the middle class increases, they will spend money in our mall, and that obviously will come through our retailer sales and rental yield."

Mr Lim added they are targeting to open Raffles City Chengdu in September.

He said: "It (Raffles City Chengdu) is already more than 90 per cent leased out. If you go to the site today, tenants are busy fitting out. What's exciting is that some of the Singapore brands are also going to open there, like Food Republic, Bee Cheng Hiang, M)phosis. So this will bring something different to the shoppers in Chengdu."

Other developers like Hong Leong Group are equally bullish on western China.

Hong Leong Group (Singapore) chief representative in Chengdu, Wang Gongyi, said: "Right now, growth has not peaked in the west, it is still catching up with the coastal cities. Therefore there is still room to grow. There are no signs of a property bubble. We're at least safe for the next few years."

In the western province of Sichuan, Hong Leong is investing around US$280 million (1.8 billion yuan) to build a complex comprising a hotel, shopping mall and business apartments. 

A Singapore group led by Sembcorp, along with Temasek and Ascendas, is also partnering the local government to build a mixed-use business park there.

Observers say mixed-use developments have grown in popularity in response to the clampdown on the residential market.

- CNA/fa/ir



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