This report highlights key developments or trends in China's real estate market during the past month, with a focus on Guangzhou, Tianjin, Chengdu, Beijing and Shanghai property market.
Beijing HeadlinesTrading Volume of Beijing Residential Property Down 24% in First Five Days of "Golden Week"
Trading volume of Beijing's residential property stood at 547 units during the first five days of China's National Day Holiday, representing a 24% decline compared to the same period last year. Sales on the secondary market declined 28% year-on-year to 60 units. Entering October, residential property prices in tier one cities were generally in decline. Declining prices did not translate to an increase in sales volume, however. Many potential home buyers put purchasing plans on hold to travel during the holiday while others adopted a wait-and-see attitude to see if prices will continue to fall.
Shanghai HeadlinesShanghai Home Owners Protest Residential Price Cuts
Zhonghai Group announced price cuts of around 20% in its "Coastal Palace" project in Pudong while Longfor announced price reductions of around RMB 4,000 per sqm in one project in Jiading. Following the price cuts, property owners who had recently bought apartments at the original rates protested the discount, destroying the Zhonghai sales office in the process. There are more than 100 residential properties on sale in Shanghai this month with a discount of at least 10%. For the majority of home buyers who are young white-collar workers looking to buy property for marriage purposes, the losses caused by the price cuts were difficult to accept.
Tianjin HeadlinesTianjin GDP Passes RMB 800 Billion
The Tianjin economy continued to grow rapidly in 3Q11, increasing by 16.5% y-o-y to reach RMB 800.6 billion for the quarter. Secondary and the tertiary industry value-added reached RMB 440.6 billion and RMB 350.0 billion, growing by 18.5% and 14.6% y-o-y, respectively. Benefiting from the rapid economic development in Tianjin, annual disposable income per capita for urban households climbed to RMB 19,357, an increase of 13.8% y-o-y in 3Q11. Consumption demand also saw a dramatic increase, with retail sales of consumer goods rising to RMB 251.5 billion, an increase of 17.8% y-o-y.
Chongqing HeadlinesChongqing Economic Growth Rate Ranks First Nationwide
Chongqing's GDP for the first three quarters of 2011 reached RMB 700.37 billion, up 16.5% y-o-y, according to the National Bureau of Statistics Office and the Chongqing Bureau of Statistics. The growth rate ranked first nationwide for the first time ever. The growth rate of secondary industry also surpassed other Chinese cities, increasing by 22.7%. Tertiary industry, including business and trade services, tourism, and the financial industry also showed strong growth, becoming a more significant driver of overall GDP.
Guangzhou HeadlinesGuangzhou Government to Unveil New Rules on Public Rental Housing by End-October
The housing authorities of Guangzhou are expected to put forward a new set of policies on the allocation of the city's public rental housing by the end of October. Among the new rules, the following are considered noteworthy by the housing officials: (1) rental homes will not be sold; (2) eligibility of an applicant will not be limited by his/her Hukou, but the applicant must have lived in Guangzhou for a minimum number of years; and (3) monthly rental rates will be segmented into specific categories with fixed prices.
Shenzhen Headlines10 Urban Renewal Projects Started in Luohu District, Shenzhen
Construction began on ten regeneration projects in Luohu District in September, including the Shenzhen Qingshuihe International Automobile Logistics Park and Shuibei International Jewellery Park projects. The projects, with a combined investment of RMB 18.9 billion, will provide about 1.5 million sqm of industrial space and 630,000 sqm of residential and retail space, with a total GFA of 2.1 million sqm. As of early October, the Shenzhen government has approved a total of 298 urban renewal schemes with an estimated GFA of 44.88 million sqm. With 5-20% of residential space required to be allocated to affordable homes, the new projects will include 1.27 million sqm of affordable housing.
Chengdu HeadlinesChengdu Continues to Attract Multinationals
Chendu's Jinjiang District successfully attracted multinationals including McKinsey & Co. and Randstad Holding to set up subsidiaries in the district during the Western China International Fair, bringing the number of Fortune 500 companies in the district to 92. In addition, Xindu County signed a cooperation agreement for machine manufacturing between SK Holdings and Sichuan Changhong Co., Ltd. The signing ceremony marked the introduction of SK's first manufacturing project in western China, which will provide parts for automotive manufacturers and electronics companies including Changhong, Lenovo, and Dell. The 50 mu development has a proposed investment of USD 30 million and registered capital of USD 12 million.
"Competition for Guangzhou's shoppers is set to intensify as a wave of new supply moves closer to completion. About two-thirds of the 687,000-sqm of prime retail floor space currently under construction will be delivered over the next 12-15 months. Not all of these new shopping malls will find initial success. In the fight for shoppers, there will be winners and losers. To succeed, new shopping malls will need to provide shoppers with a unique experience that goes beyond retail offerings. Outstanding property management and superior customer service will be crucial in order to win the hearts and minds of shoppers."
Denis Ma, Local Director, Greater Pearl River Delta ResearchShenyang HeadlinesShenyang Property Prices Flat in September
On 18 October, the China Statistics Bureau released its August property price trends for 70 large and middle cities. Property prices in Shenyang remained flat, only increasing by 0.1% q-o-q. Prices in the secondary market in Shenyang increased 0.7% q-o-q.
Qingdao HeadlinesQingdao Residents Express Decreasing Propensity to Consume and Increasing Debt Pressures
The People's Bank of China recently conducted a survey of its urban depositors in Qingdao. The result shows that 78.6% of citizens are dissatisfied with current housing prices. Due to government tightening policies and a general wait-and-see attitude, only 14.3% of citizens are planning to purchase a home within three months, a 1.1% decrease from 2010. Moreover, because the lending rate has been increased, 43% of citizens expressed increased pressure in repaying loans, an increase of 22.3% over the same period last year.
InvestmentHitachi to Establish Western China Headquarters in Chongqing
Hitachi CRL and Hitachi China signed a tripartite memorandum of understanding with Liangjiang New Area government on 17 October to build Hitachi's headquarters for Western China in Liangjiang New Area. The headquarters will be involved in resource distribution and low-carbon technologies.
Oriental Ginza Purchased 60% Stake in Qingdao Sea Carnival Project
On 23 September, HK-listed Oriental Ginza Holdings Limited announced that it has purchased 100% of shares in the Sea Carnival development from Easy Linkage Development Limited for HKD 4.3 billion. The acquisition will make Oriental Ginza a 60% owner in the project. Sea Carnival, with a total GFA of 740,000 sqm, is located to the south of Binhai Avenue on Tangdao Bay in Huangdao District. The project will include an indoor ocean theme park (71,000 sqm), a five-star hotel (97,050 sqm), Fisherman Wharf Commercial Pedestrian Street (around 120,000 sqm) and residential development (around 350,000 sqm). Sea Carnival is planning to hold a soft-opening at the end of next year.
OCBC Spends RMB 902 Million to Acquire International Group Plaza in Shanghai
OCBC Bank announced on 12 October that its subsidiary, Eastern Realty Company Limited (ERC) purchased Shanghai International Group Plaza – a six-storey office building in Pudong with GFA of around 23,000 sqm. The purchase was made by acquiring all shares from the building's owner, Shanghai International Group Plaza Co. OCBC Bank plans to use the building as its China headquarters and will rename the building OCBC Bank Building. ERC purchased all shares in the building on 29 September for RMB 311 million in addition to acquiring RMB 591 million of debt from the former owner for a combined price of RMB 902 million.
Shanghai's Channel One Shopping Mall Sold
In September, the decentralized Channel One shopping mall was sold for RMB 1.46 billion by Blackstone Group to Hong Kong New World Development, representing the first time that a mature shopping mall with low vacancy has been transacted in the Shanghai market. The transaction price was RMB 34,762 per sqm. Blackstone previously purchased the property for approximately RMB 930 million in 2008. The mall, which opened in 2009, is located on Changshou Road in Putuo District, with anchor tenants including H&M, Zara and Uniqlo.
Shenyang Sells Six Land Plots; Dingxiang Lake Xincheng Plot Fetches over RMB 400 million
On 11 October, Shenyang successfully sold six plots of land with a total planned GFA of 606,618 sqm. The Xincheng plot, located in the Dingxiang Lake area, with a total area of 157,531 sqm, is a commercial plot with a plot ratio of less than 2.0. Zall Development (Hong Kong) Holding Co, Ltd purchased the plot at a price of RMB 2,627 per sqm., or just over RMB 400 million.
China International Happiness Mall to Be Built in Tianjin Airport Economic Zone
China International Happiness Mall, located in the Tianjin Airport Economic Zone, will be constructed as the largest elderly & disabled products trade centre in China. The market will fill the need for elderly and disabled needs in Northern China as there are not yet any large-scale markets for such products. With a total GFA of 44,000 sqm, the project is expected to be completed and put into use in May 2012. Upon opening, the market will also help the elderly and disabled community source customized and personalized products.
RetailVivienne Westwood Opens Shanghai Flagship Store in Grand Gateway
Arriving during Shanghai's Fashion Week, Vivienne Westwood came to Shanghai last week to celebrate her brand's flagship store in Grand Gateway, a high-end mall owned by Hang Lung Property Co., Ltd. Prior to its new Shanghai location, the luxury brand had also opened stores in Shanghai ifc (September 2011) and Shin Kong Place in Beijing. Vivienne Westwood has established a joint venture with Ginza Group, a retail operator based in Jinan, Shandong Province. The retailer also plans to open two new stores in Hangzhou and Jilin later this year.
China's Retail and Food & Beverage Sectors Grew 17.5% During "Golden Week"
According to a statement on 7 October from the Ministry of Commerce, China's retail and F&B sectors posted year-on-year sales growth of 17.5% during the National Day Holiday running from Oct. 1-7, also known as "Golden Week" for businesses. The total revenue of both sectors reached RMB 696.2 billion as companies nationwide cashed in on the holiday period and staged various promotions to boost sales.
China Resources Vanguard Launches in Starlight Place in Chongqing
CR Vanguard opened on 29 September in Starlight Place in Chongqing's Nanping precinct. The supermarket has a total area of 30,000 sqm and over 50,000 commercial goods. At present, international fashion brands ZARA, H&M and Uniqlo, the flagship store of domestic retailer GMS, a South Beauty restaurant, and Jinyi IMAX cinema have all entered Starlight Place, which will be open by the end of October.
G5 Mall Opens for Business in Guangzhou
G5 Mall in Baiyun District held its grand opening ceremony in late September. Redeveloped from the old Guangzhou airport and designed with an "aviation" theme, the shopping centre comprises 130,000 sqm of retail space, and has signed Jusco (approx. 5,000 sqm), a Golden Harvest Cinema (approx. 4,000 sqm), Guangzhou Restaurant (approx. 4,000 sqm), and Tee Mall Department Store (approx. 16,000 sqm) as anchor tenants. As the second large-scale shopping centre in Baiyun New Town following Wanda Plaza, the G5 Mall will inject fresh momentum into Baiyun District's retail market.
ResidentialInterest Rates for First-home Loans Continue to Rise in Qingdao
Many domestic banks have raised their interest rates for first-home loans in Qingdao. Bank of China and CITIC Bank increased their rates by 5%, Industrial and Commercial Bank of China and Bank of Qingdao increased its rate by 10%. China Everbright Bank increased its rate by 5% to 10% according to the borrowers' ability to repay the loan. Lastly, China Construction Bank increased the interest rate for first-hand first-home loans by 10%, and second-hand first-home loans by 15%.
Mortgage Rates for First Homes in Shenyang Cause Banks to Exit Business
As mortgage rates in Shenyang continued to rise over the last six months, some banks have chosen to leave the home mortgage business altogether. For example, ICBC now only offers standard mortgage rates to large-scale projects, while owners of small projects must pay 10% above the standard interest rate. Some banks have increased their mortgage rates for a first property to over 20%.
IndustrialBeijing to Build Alternative-Energy Vehicle Industry Park
On 25 September, the Beijing Government signed an agreement with an automobile manufacturer to build the country's largest industrial park for producing components for alternative-energy vehicles. According to an agreement signed by the Pinggu district government and Beiqi Foton Motor Co. Ltd., the industrial park will be located in the Xinggu Economic and Technological Development Zone in Beijing's suburban Pinggu district. The park will manufacture and sell components and high-end equipment for the production of alternative-energy vehicles, as well as provide logistical services. The park is expected to be completed by 2017.
Siemens to Build Its Largest Digital Plant in Chengdu
Siemens (China) Co., Ltd. signed an agreement with Chengdu Hi-Tech Zone on 17 October, planning to construct an automated production and research facility in Chengdu. The facility will be Siemens' largest digital plant in Chengdu, and is the company's third automated production plant following facilities in Germany and the United States.
Goodman Group to Boost its Investment in China 10-Fold
Australia's Goodman Group, an industrial property giant that owns, develops and manages industrial space globally announced that it plans to increase its investment in China 10-fold to RMB 19 billion (USD 2.98 billion) in the next five years, expanding its total investment in China to RMB 32 billion. Although China currently has approximately 550 million square meters of warehouse stock, Goodman estimates that less than 1 percent of the total supply is modern logistics space. The group believes that there are enormous opportunities in China's underdeveloped and highly fragmented logistics market.
North China's Largest Mercedes-Benz Logistics Park to Come to Tianjin
Mercedes-Benz Logistics Park, an integrated industrial facility for Mercedes-Benz automobiles, has settled in Tianjin Dongjiang Free Trade Port Zone. With a planned investment of RMB 240 million and total area of 300,000 sqm, the project will built into a variety of sections that will include a Mercedes-Benz 4S Shop, off-road testing ground, logistics and trading centre, training centre, refit facility and commodity turnover warehouse. Upon completion, a portion of Mercedes's assembly lines will be moved to Dongjiang Free Trade Port Zone from Germany. Mercedes-Benz Logistics Park will further accelerate the development of the existing automobile industry in the Dongjiang Port area.
ExpansionPrada to Open 50 New Stores in China Within Three Years
According to its expansion plan, Prada will double its total number of stores worldwide in the next three years by opening 80 new stores each year. With this move, it is expected to have 550 retail stores around the world by the end of 2013. Asian countries, especially China, are reportedly in a strategic position in Prada's new expansion plan, with half of the new stores to be located in Asia, including 50 in China.
Volkswagen to Invest USD 19 Billion in China German carmaker Volkswagen announced on 26 September that it plans to invest USD19 billion in China from 2012-2016. The company has previously released a plan to invest USD 14.3 billion in local joint ventures from 2011- 2015. Volkswagen sold about 1.9 million vehicles in China last year and expects to exceed the 2 million unit threshold for 2011.
Infrastructure
Beijing Released Plans for Four New Subway Lines
On 20 September, Beijing released plans for four new subway lines: The Western Suburban Line, Phase II of Line 6, Line 14, and a connection between the Changping Line and Line 8. The four lines will be completed in 2013 and 2014 with the total length of 74.4 kilometers.
Two Major High Tech Projects Launched in Chengdu Tianfu New District
Two major projects, the International Low Carbon Green-Tech Zone and Tianhe Bio-Tech Zone, have both been launched in Tianfu New District. The International Low Carbon Green-Tech Zone will focus on the advancement of energy saving technologies and the establishment of an intelligent energy grid for the city. The zone has a planned investment of RMB 4 billion over the next five years. The Tianhe Bio-Tech Zone has a planned investment of RMB 5 billion over the next five years with industrial capacity to reach RMB 10 billion by 2021 and RMB 50 billion by 2026.
Taiwan Far Eastern Air Transport to Open Chengdu – Kaohsiung Direct Flight
Taiwan Far Eastern Air will open a direct flight route between Chengdu and Kaohsiung next month, becoming the third Taiwanese airline to open a direct flight to Chengdu after China Airlines and EVA Airways.
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