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China to curb use of debt for property soon

Posted on 11 Nov 2009 | Comments Off

China’s central bank and banking regulator may ’soon’ issue measures to limit the use of debt in property purchases after asset prices climbed, a Shanghai official said.

Regulators may reduce ‘leverage ratios’, Fang Xinghai, the director-general of Shanghai’s financial services office, said at a forum in Beijing yesterday.

A record US$1.27 trillion of new loans this year and inflows of cash from investors betting that the yuan will appreciate threaten to create stock and property bubbles. China’s banking regulator plans to review debt levels at some developers on concern that borrowings are fuelling excessive gains in property prices, a person familiar with the matter said previously.

‘Asset prices may continue to climb as foreign capital flows into China betting on the yuan’s gain,’ said Xing Ziqiang, an economist at China International Capital Corp in Beijing.

A measure of property stocks on the Shanghai Composite Index declined one per cent, the biggest fall among five industry groups.

‘Given the rise of asset prices, whether in real estate or the stock market, or some kind of other assets, there is a case for reducing the leverage ratio in these areas, particularly in the real estate area,’ Mr Fang said yesterday.

His office is a local regulator and policymaker, underneath the Shanghai government.

While home prices rose at the fastest pace in a year in September and the Shanghai Composite Index of stocks has climbed 73 per cent this year, Mr Fang is ‘not concerned’ at asset-price levels. Existing rules, such as a 30 per cent down-payment requirement for first mortgages and restrictions on borrowing to buy stocks, limit risks to the financial system, he said.

The China Banking Regulatory Commission said on Oct 28 that it plans to tighten rules on personal loans to prevent them from being used for speculation.

The commission also wants to reduce leverage at developers that bought land at inflated prices and at large state-owned companies that have entered the property market, the person familiar with the matter said, declining to be identified because the plans hadn’t been made public.

Excessive borrowing by some developers threatens to cause an increase in delinquent debts should prices collapse, the person said.

Source : Business Times – 10 Nov 2009

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CapitaLand sees upswing in China business

Posted on 9 Nov 2009 | Comments Off

Improved sentiment has translated to better sales at its residential projects

CAPITALAND, which is seeking to grow its presence in China, is riding on improved market sentiment in the country, say top executives in an update.

‘We can see a rise in the level of consumer confidence,’ said Lucas Loh, chief investment officer of CapitaLand’s China unit. He attributed this partly to a rise in the level of China’s exports over the last few months.

Indeed, the improved sentiment has already translated to better sales at the group’s residential projects and better occupancies at the properties run by the company’s serviced residence arm, The Ascott Group.

CapitaLand has a portfolio of about 100 projects in the residential, commercial, retail, serviced residence and integrated development sectors. The developer’s projects are found in some 50 cities across China, including Beijing, Chengdu, Dalian, Guangzhou, Shanghai, Shenzhen and Tianjin.

Having spread out rapidly across China since it first entered the country 15 years ago, CapitaLand is now looking to expand further in each city it has a presence in.

For example, Ascott will open three more properties next year – two of which will be in cities where the company already has a presence.

After a ‘tough’ first two quarters this year, the company saw demand and occupancies rebound strongly from July, said Ascott’s senior vice-president, Gerald Yong. Following the fallout from the global financial crisis, occupancy rates at Ascott’s China properties fell to 65-70 per cent in Q1 and Q2 this year.

But on the back of the ongoing recovery, country-wide occupancy has since rebounded to around 85-90 per cent. ‘Judging from the last two months, the fourth quarter should be very positive and we are looking forward to 2010,’ said Mr Yong.

The residential market has likewise picked up of late, Mr Loh said. CapitaLand has sold about 1,800 homes in China since the start of the year. In comparison, just 782 homes were sold in 2008.

‘We see this momentum continuing,’ said Mr Loh. ‘For CapitaLand China, we maintain the view that the residential market will continue to be robust.’

The group intends to launch a high-end project in Beijing, the 1,027-unit Beaufort, in January 2010. A total of 467 units will be offered in the first phase, at about 24,000-25,000 yuan (S$4,896-5,100) per square metre.

And as for the retail market, CapitaLand is looking at both brownfield and greenfield developments for acquisition opportunities, said Wee Hui Kan, chief executive of CapitaRetail China Trust (CRCT). A property trust listed on the Singapore Exchange, CRCT owns eight of the 50 malls CapitaLand currently has in operation or under development in China.

In October, CapitaLand announced plans to spin off and list its retail arm, which has a $20.3 billion portfolio – including the 50 malls in China. China is expected to be the engine of growth for the new company, CapitaMalls Asia.

Source : Business Times – 9 Nov 2009