Archive for the ‘China’ Category

Commuting in Beijing

Thursday, July 24th, 2008

It’s an even number plate day today. With half the city’s privately owned cars off the road, traffic is running smoothly. Secondary roads are free-flowing but there’s still significant traffic on main arteries like Changan Jie at peak hours.

The #10 subway that runs along the East 3rd Ring has just opened putting Chaoyang Park, Sanlitun and Lufthansa Centre within a short stroll of a station. It took a few days for Beijingers to get acquainted with it but the new swipe card ticketing system is running well too. Fares are still at a flat RMB2.00 irrespective of destination. Will they increase and become destination dependent as in Shanghai? The hardware’s certainly there.

Our handy new Beijing subway map can be downloaded here.

Q & A: Olympics and rents

Friday, May 30th, 2008

The games are two months away and developers are rushing to complete their edifices. The exteriors of China World Tower 3 & CCTV Tower will be ready but tenants will have to wait till the end of the year before fit-outs are completed. The Olympic venues are of course ready. Here’s the answers to questions I’ve been asked recently:

Q. Have apartment rents increased due to the Olympics?
A. Rents have increased about 10-15% (varying by complex) in the last 12 months but not for reasons directly related to the Olympics. For August 08, many landlords owning properties in the sub-RMB20,000 range are hoping to rent out their properties for 3-5 times the normal rent rent. This has caused some distortion on rents affecting long-term tenants moving in this summer. If Beijing follows the trend in Sydney and Athens, landlords with high expectations will be disappointed. Nevertheless, they are still high.
For apartments with rents above RMB20,000/month, there’s less of an Olympic effect.

Q. How about rent at serviced apartments?
A. There are still plenty of availabilities, but many serviced apartments are still asking for astronomical rents for August. Will they hold out, or drop their rents in June or July?

Q. Do you expect rents to come down in September?
A. Yes, but by not more than 5%. This will mainly be due to the slack from landlords who (successfully or unsuccessfully) kept their apartments for Olympic guests in August 08.

Q. How about rents at houses in Shunyi?
A. Again, we’ve seen 10-15% rent increases there in the last year but there’s little Olympic effect. Few tenants in Shunyi are associated with the Olympics and the more seasoned landlords in Shunyi are pragmatic. They prefer tenants who provide stable long-term term rental revenue from their tenants.

Tremors in the CBD

Monday, May 12th, 2008

CBD tremoursAt about 14:40, we felt a gentle swaying in our 21st floor office. Within minutes, we’d walked down the stairs and joined the thousands in the street below. The mobile networks were overloaded.

The epicentre of the 7.8 quake was in a mountainous region of Sichuan.  As I write, Rueters is reporting casualties in the southern region. The tremors in Beijing registered 3.9.

Price increases declining

Friday, April 11th, 2008

Economist 0804This week’s Economist devotes a page to gloomy news on China’s property market. It mentions developers in Shanghai retaining list prices but offering rebates taking up to 10% off. While Shenzhen has seen prices drop by 28%, prices in Beijing remain more robust, but sales have definitely slowed.

An article in mentions a Central Bank survey in 50 Chinese cities showing that only 14.6% plan to buy homes in the next quarter, down 1.3% from the last quarter. The article also notes growing trend of investors choosing to hold and rent out their properties rather than sell. Rents at popular properties have increased by upto 15% over the last year. With the heady days coming to a close, it will be interesting to see how things pan out. Will increased supply slow the rent increases? With slowing capital gains, will landlords prefer steady rental income over flipping?

Retail real estate agents closing outlets

Monday, January 21st, 2008

In the last week we’ve been reading news articles on real estate chains closing retail outlets in major cities such as Shenzhen, Guangzhou, Beijing and Shanghai. In China, agents with a street-side presence deal in mid to low-end housing.

It’s not uncommon to see a row of 5-6 real estate agents on one street, and then another row of them round the corner or across the street. You’ll see both home-grown and foreign brands. Business owners wanting to buy into perceived respectability can join foreign franchises such as Century 21 and Baker Caldwell. Properties are not listed exclusively, so with few exceptions, all real estate agents have access to the same properties.

The two pre-requisites for entering the business are (1) a retail space in an area with a high density of privately owned mid to low-end housing (2) A team of resourceful salesmen

Streets with a row of real estate agents are market places in the truest sense. Some start the day with the rather foreign practice of lining up outside the front door reciting self-encouragement slogans. Signages may be large, but retail spaces barely seat the employees who spend much of the day on the pavement, ready to deal with potential clients. In Shanghai, where business is always at a faster pace, a squad of electric bikes is always on hand to zip out to a property with a potential client. The incentives are strong. Salesmen are typically from the provinces where there’s an abundance of young people willing to give it a go. Basic salary is low or non-existent. In good times, the talented have made fortunes in a market where negligible capital gains taxes encourages flipping. But for every success story, there are many who barely scrape by. Reports mention that some have not been paid commissions due.

The Chairman of Changhui, one of the afflicted chains was quoted by as saying they’d “grown too fast and too big” (source: AP). With such low barriers to entry, it’s not surprising. The signs of over capacity were there. In the last six months, we noticed retail agencies setting up makeshift stands outside subway stations at peak hours in an attempt to reach out to clients.

Plastic bag ban

Monday, January 14th, 2008

Thursday’s announcement that ultra-thin plastic bags will be banned by 1 June 2008 has received massive media coverage in recent days. Supermarkets and shops will have to charge for thicker plastic bags, currently provided free. Jenny Lous (RMB0.20) and IKEA (RMB1.00) took the win-win plunge months ago.

Do your bit and stuff your washable Lihong tote in your regular work-bag.

China probes foreign investment

Wednesday, January 9th, 2008

A survey initiated by the State Administration for Industry and Commerce (SAIC) has sparked concerns that new moves may be on the way to curb foreign investment in the real estate sector. The survey was announced via an “urgent notice” on the official Web site of the SAIC’s Registration of Foreign Invested Enterprises unit. In its article, Money Morning quotes Asian investment expert Jim Rogers as saying that even if China’s stock market were to plummet, that country’s economy would remain healthy, and would continue to advance unchecked.

Currently, only foreign institutions establishing branches or representative offices in China and individuals working or studying in China for more than one year can purchase apartments for their own use.

On another note, the government’s focus on affordable housing for low-income households may be having an effect. Last November, local authorities were urged to reserve at least 70% of residential land to low-rent or low-cost homes. CRI quotes analysts as saying the drop in floor space of marketable, unsold buildings from 4.5% to 117.97 million square meters in November may be a result of this move. Little or no foreign investment is in the low-end segment.

China Radio International
Money Morning

More restrictions on real estate loans expected in 2008

Wednesday, December 12th, 2007

With real estate prices increasing by 10.5% over a year from November, the government is expected to further restrict monetary policy for property developers and investors. Zhang Tao, deputy director of the finance research department at the People’s Bank of China, had earlier in the year mentioned that bank loans provided more than half the capital controlled by China’s property developers. An anonymous quote from the director of a State-owned property developer predicts that banks loans to the property industry may drop by as much as 50 percent in 2008.

Source: China Daily

New subway construction in Beijing

Saturday, December 8th, 2007

Five new subway lines totaling 140km started construction in Beijing on Saturday. They will be completed by 2015. The first phase of Line 10, Line 8 and a 28-km line linking the city to the airport are currently under construction. The Olympic and airport line will be completed before the games next year.

Beijing currently has 142km of subway lines but plans to have 561km by 2015. There are 1.2 million private cars in the city and about 1,000 new cars appear on the city’s streets each day.

Source: China Daily

Bank reserve ratio raised 1%

Saturday, December 8th, 2007

The central bank has announced that effective 25 December, China will raise the reserve requirement ratio by 1% for commercial banks. This pushes the ratio to a new high of 14.5% and is the 10th reserve ration increase this year. The move follows the government’s announcement that it will shift it’s monetary policy from “prudent” to “tightening”.With the coming CPI for the first 11 months expected to reach a new high, this move is aimed at stemming inflation rates. It is estimated that this will reduce liquidity in the market by RMB400 billion.

Source: China Daily