Monday, December 21, 2015

China Market

Shanghai Forest
📸 :  Co

CHINA |  Property Market

Sales volume expected to decrease although prices may not go down in certain sectors

CHINA | Outbound Investments

This paper puts housing front and center, and very effectively too. --Andrew Baston

From the conclusion:
We find that conventional analysis understates the role of the household sector in contributing to the high investment share of the economy. Our explanation for the imbalances emphasises the role played by housing market deregulation as one of multiple prolonged positive productivity and demand shocks to the Chinese economy that simultaneously sustained returns to capital, lifted investment and boosted both private and public saving. While recent discussions stress the need to reform financial markets to foster rebalancing, we argue that rebalancing will probably happen anyway as a natural outcome of dwindling income windfalls from worsening demographics, fading positive productivity shocks and maturing housing markets, all of which helped drive the imbalances in the first place.
And some more details from the body of the piece:
The role played by the deregulation of housing markets in China deserves special emphasis. In 1988, the Chinese constitution was amended to legalise the transactions of land use rights, laying the foundation for private home ownership. Throughout the 1980s and 1990s, most of the housing provided by SOEs to their employees was privatised at a discount to the replacement cost. Mortgages were introduced in 1997, and official mortgage rates were cut five times during 1998-2002 to counter the negative consequences of the Asian Financial Crisis.
The deregulation of housing markets saw residential investment rise sharply starting in the early 2000s to almost 16% of GDP currently. This housing boom stimulated huge capacity-building in many related upstream and downstream industries, including steel, cement, glass, household appliances and financial services. Using data from the 2010 input-output tables and more up-to-date data on value-added, Xu et al (2015) estimate that, directly and indirectly, residential housing accounted for 29.4% of GDP growth in 2013.
It is likely that the housing boom simultaneously boosted growth, investment and saving in China while subtracting from net household income (through higher mortgage payments). The rise of private home ownership in the late 1990s boosted incentives to save by households strongly motivated to upgrade their housing and to build up private assets, while generating higher investment. As discussed, the rise in household investment mostly reflected individual investment in residential construction. The property investment booms in the 2000s further boosted land sales proceeds accruing to local Chinese governments, helping to fund investment in infrastructure. At the same time, the steady rise of mortgage loans as a share of total credit (reaching 12% in 2014) implied larger interest payments by home-buyers to financial institutions and a corresponding fall in households’ net property income. In turn, this contributed to the decline in the household share of income in the 1990s and 2000s.
The housing boom increased both sales volumes and prices, lifting corporate earnings and the return to capital across many related industries and helping to underpin strong corporate saving and investment until the late 2000s. In sum, the opening of the housing market can be viewed as a prolonged positive demand shock to the Chinese economy, sustaining returns to capital, boosting investment and lifting both private and public saving at the same time.

Reasons to Invest Abroad

Win the hearts of China’s damas – the country’s middle-aged and elderly women – and you’ll be well on your way to winning the China market.

Affluent and with plenty of spare cash to invest, China’s damas made the headlines in recent years after they rushed to buy gold in 2013, helping global gold prices stabilise from a sharp sell-off.

This group of Chinese women, who generally possess limited financial knowledge, are being keenly pursued by wealth managers and property agents as they eye China’s promising silver-hair market.

People aged above 60 will make up 39 per cent of China’s population by 2050, compared with the present 15 per cent, according to official data.

Damas are often seen in stock bourses, banks and property agencies as they go about their investment decisions in much the same way as they buy clothes in shopping malls and food in the wet markets.

“I have held shares of many enterprises, though I don’t understand their business,” said Yu Liping, a 58-year-old retired woman in Ganzhou, Jiangxi province.

“My investments are all recommended by my friends and I believe in group psychology, which means things bought by many people are a must-buy.”

Yu said all her friends and relatives her age invest. Only the very old people, like those in their 80s, would leave their money in the bank, she said.

“But in China, there are very few investment options, and if others say a financial product is good, I will also regard it as good and join the buyer’s cohort,” she said.

Yu followed her friends in buying shares of a Hunan-based bamboo fibre manufacturer in August last year and is looking forward to the company’s Australia listing next year.

But even as she enthusiastically shared details of that 150,000 yuan investment, Yu also related the woeful tale of having put 100,000 yuan earlier this year into Shenzhen Anzi Group, which was collecting funds from the public to launch its online shopping centre.

The group was in July exposed by the Southern Metropolis News for conducting illegal fund-raising and its founder was put under police investigation. Yu has not received her money back from the investment.

Yu also recalled putting 380,000 yuan into shares when the stock market was bullish last year. The stocks’ paper value had since shrunk to just 80,000 yuan, she said

The dama attributed her investment failures to new technologies and concepts such as peer-to-peer financing, trust products and crowdfunding.

“I don’t really know how to use the internet well,” she said.

Even so, Yu and her counterparts are considered financial firms’ VIPs, with wealth managers sparing no effort in maintaining good relations with them.

“Dama usually have a large amount of idle money after having saved throughout most of their lives. In a majority of families, women are the financial controllers,” said Ivan Li, a wealth manager who used to work at a China Merchants Bank branch in Shanghai’s Huangpu district.

“After retiring, these women are free all day and are more willing to invest than young people who are always busy with their work,” Li said.

The wealth manager said at least half of his 400 clients were damas and that the average amount of assets each dama put in his bank came up to half a million yuan.

In dealing with this group of clients, sales workers relied more on their “selling skills” than on professional knowledge, he said.

Last year, the Beijing Evening News reported that a young Pingan Bank accounts manager joined dozens of damas in dancing at a public square in Beijing every evening as a business development tactic.

“Because damas have little knowledge of financial products, sales people should be patient enough to answer their trivial questions,” Li said. “Some aunties spent two to three hours in front of our banks, inquring about our products and chatting with us.”

Xu Jinping, general manager for Fu Hua Asset’s eastern China region, said good sales attitude was an important factor behind many damas’ investment decisions.

The latest Standard & Poor’s Ratings Services Global Financial Literacy Survey found that 63 per cent of Chinese adults who owned a credit card were financially illiterate. The poll measures a person’s financial literacy based on his or her understanding of concepts such as risk diversification, inflation and compound interest.

More than 70 per cent of adults in Asia did not adequately understand these key monetary ideas – higher than the world average of 66 per cent – according to the survey.

“In future, there will be fewer such elderly women who like to invest but are financially illiterate,” Xu said. “The market teaches them lessons and people will become more educated in wealth management.” -- 2015 December 21 SOUTH CHINA MORNING POST

Thursday, September 10, 2015

Stanley Dee

717 Davie

Kudos to the Deecorp team for securing green light from the Design Panel for their redevelopment of the Tsui Hang Tsuen site at the north-west corner of Granville and Davie in Vancouver which will become rental units in time.

Preliminary plans call for a redeveloped site include a 7-storey mixed use building. The proposal includes the following:
    • 94 residential units (75 one-bedrooms and 19 2-bedrooms)
    • Retail on the ground floor;
    • Total density of 3.85 FSR (3.5 max + 10% heritage bonus)
    • Building height of 71 ft.
    • Total floor area of 69,300 SF
    • 47 underground parking spaces accessed from the lane

Friday, July 31, 2015


Vancouverites were recently surprised to hear about a parking spot for sale for $45,000 CDN in a Downtown condo development.

But its worthwhile pointing out that this is common practise in Asian markets like Hong Kong.  An article in the June 3, 2015 edition of SCMP's Property Post flagged the risk of low volume of trades and high price volatility.   More than 6,700 private residential parking spots were sold in the city in 2014.

  • The average price for a Hong Kong Island parking spot is ~HK $1.41 million while its equivalent on the Kowloon side is ~ HKD $1.22 million.   [For currency exchange, refer please to ]

The following charts were provided by the author of the article on aggregate sales of between the period 1996 to 2014 inclusive:

Saturday, July 11, 2015

Peninsula Hotels

Friday afternoon tea at the Peninsula in NY

A photo posted by Erica Choi (@eggcanvas) on

Peninsula hotel owner plans to expand residential investment overseas

Hotels group plans to fund expansion by selling residential developments

Hongkong and Shanghai Hotels, which owns 10 Peninsula hotels around the world, plans to expand its overseas residential developments for sale in a bid to finance part of its hotel expansion and bolster revenue.
The group aims to include residential developments in London, Yangon in Myanmar, and possibly Bangkok.
"It helps the investment we have with the residential portion that can be for sale," said Martyn Sawyer, the group director for properties.
These residences would be adjacent to either the group's existing or future hotel properties, he said.
Among them, the group's 50-50 joint venture with Grosvenor to develop a hotel-commercial-residential project would be a major one, said Sawyer who is entering his 30th year at the group.
The partnership will redevelop the 1.5 acre site opposite the gardens of Buckingham Palace and overlooking Hyde Park into a mixed-use development, including the group's first hotel in Britain, The Peninsula London.
"Within the complex there will be some apartments for sale," Sawyer said, without disclosing the total investment cost.
HSH acquired its 50 per cent interest from the previous owner, Derwent London, for £132.5 million (HK$1.56 billion then) in July, 2013.
Sawyer said the development plans and design have been submitted for planning approval and he expects the project would not be completed until 2020.
In Myanmar, HSH will build an 88-room boutique-size hotel called The Peninsula Yangon on a site that housed the former Myanmar Railway Company headquarters in the centre of Yangon, he said.
There would be a separate residential tower near the hotel which would be for sale.
In Thailand, the group is also looking at the potential of adding a residential tower on a piece of extra land at the back of The Peninsula Bangkok.
"It is purely in the planning stage [in Bangkok]. We will evaluate the possibility of building a residential project there," he said.
However, due to the political instability in Thailand, HSH may not go ahead with the project, he added.
Sawyer, however, said it would not be a definite requirement for the group to add residential projects close to its Peninsula hotels.
"There are hotel investments we are looking at without residential spaces in it. Each site in each country is different," he said.
In future, these residential apartments would also be released for sale in Hong Kong, Singapore and on the mainland, he said.
The group's luxury Peninsula Residence in Shanghai's Bund area is also offering the remaining units for sale. The development had achieved average transaction prices of 220,000 yuan per square metre.
In C-Suite P3, Sawyer discusses the strategies the firm will adopt to meet the challenges facing Hong Kong's property market.    -- 2015 July 8   SOUTH CHINA MORNING POST

Monday, June 29, 2015


Hermès International HQ

Hermès headquarters 13 -15 Rue de la Ville L’Evêque in Paris is available for purchase as investment.   At  €100m, this would equate to a 4.0% net initial yield.       We understand the asking price is in excess of €100m.

The building is let in its entirety to Hermès International on a recently renewed nine year lease.

Located in the heart of the Paris CBD, the building features over 5,848 sq m of lettable area. Redeveloped in 2006, the modern building is set out over four lower ground floors with car parking, ground and nine upper floors.    -- 30 June 2015

Tuesday, June 23, 2015


APG buys stake in Chinese retail property developer Chongbang

APG the €424bn asset manager for Dutch civil service pension fund ABP, has taken a €311m stake in Chinese non-listed retail property developer, owner and operator Chongbang.

Sachin Doshi, APG’s head of private real estate investments for the Asia-Pacific, said the investment fit within APG’s strategy to participate in “city-specific platforms in key gateway urban centres around the world”, partnering with local management teams.
“Rapid urbanisation, growing disposable incomes and continued rebalancing towards domestic consumption are recurring themes in China, and Shanghai will lead this consumption story,” he said.
“We like Chongbang’s deep understanding of consumer preferences and the strong lifestyle-themed retail complexes they have built and operated successfully under the Life Hub brand."
Harmen Geers, spokesman for APG, added: “To get a foothold in China, finding the right local partner is crucial.”
At the same time, Canadian property firm Ivanhoé Cambridge has also taken a €445m stake in Chongbang.
Rita-Rose Gagné, executive vice-president of growth markets at Ivanhoé Cambridge, cited the “outstanding track record and a compelling long-term vision of Chongbang’s team”.
“Now they are in a better position than ever to respond to evolving consumer preferences and to new technologies that are reshaping the customer experience,” she said.
Last year, APG made a €578m commitment to Shanghai-based logistics developer e-Shang.
Shanghai-based Chongbang was founded in 2003 by Singaporean and Hong Kong investors, led by Stephen Wong and Henry Cheng.
The company owns and operates 428,000 sqm of mixed use retail and residential property, as well as commercial space in Shanghai, with another 417,000 sqm under development. 
Cheng, Chongbang’s chief executive, said the company aimed to more than double its portfolio over the next few years to consolidate its position as a “landlord of choice” for top retail and lifestyle tenants in the Shanghai area.
Singapore’s sovereign wealth fund GIC and the Edward Wong Group are among the main shareholders of Chongbang.   -- IPE   2015 June 23

Monday, June 8, 2015

New Money in Vancouver

With China's stock market creating two billionaires each weekVancouver has become a net beneficiary 

Bogus ‘analysis’ obscures the role of foreign money in Vancouver’s runaway housing market
BC’s government is relying on flawed data provided by the real estate industry
If there’s one thing that should unite both sides of Vancouver’s debate about housing affordability and the role of foreign money in the real estate market, it’s the need for more data.
But apparently not everyone agrees. British Columbia’s housing minister, Rich Coleman, dismissed the idea of even tracking foreign ownership (let alone curtailing it) when it was raised in the provincial legislature last month. Housing prices in BC’s lower mainland were “pretty reasonable”, he helpfully added. Jaws were dropped. Eyebrows were raised.
Coleman’s boss, Premier Christy Clark, then weighed in. In a June 4 letter  to Vancouver’s Mayor Gregor Robertson, in which she hosed down his requests for a speculation tax, Clark cited a new BC Ministry of Finance analysis on foreign ownership.
That analysis, in turn, cited estimates that “foreign buyers” likely make up “less than 5 per cent of home sales activity in Greater Vancouver”.
If there’s a shortage of data, where did this swift and comforting estimate come from?
As usual in Vancouver, all roads lead to the real estate industry.

The BCREA's expert opinion

The expert opinion that formed the basis of the ministry’s analysis was that of the BC Real Estate Association and its chief economist Cameron Muir, who wrote to the ministry on May 28.
Muir’s 10-page letter admitted there was a lack of hard data on foreign ownership and suggested it be monitored. Nevertheless, Muir also cited a host of data which he claimed supported the BCREA’s less-than-5-per-cent theory.
But there are enormous inadequacies in the BCREA’s analysis.
It misleadingly cites foreign occupancy as a substitute for foreign ownership. Even worse, by setting “foreign owners” or “foreign investors” as the focus, the analysis ignores foreign money: that is, foreign-sourced wealth that is poured into Vancouver real estate by rich immigrants, who conveniently escape the BCREA’s “foreign” designation. 
From an affordability perspective, it really matters not if a buyer is foreign - it matters if their money is foreign. But the BCREA would much rather everyone stop looking at the money and focus on the official residency of the buyer.
Those 45,000 rich immigrants who arrived in Vancouver under wealth-determined schemes from 2005-2012? They simply don’t count, as far as the BCREA is concerned. As permanent residents, they are not foreign, no matter where their money comes from.
In assessing foreign ownership, the BCREA analysis cites authoritative-sounding 2011 Census data. But this data doesn’t even mention foreign ownership (let alone foreign money), and instead depicts “the share of private dwellings that were either unoccupied or occupied by foreign or temporary residents on Census day”.
“Therefore, the Census data can be viewed as an upper bound on possible foreign ownership,” the BCREA says. Exactly how? Construing foreign occupancy as indicative of ownership is just as silly in Vancouver as it is in any city with a significant portion of renters. And more than 35 per cent of all households in Metro Vancouver rent (307,555 out of 891,310 households in 2011). In the City of Vancouver, the proportion is more than 51 per cent.
The BCREA analysis then cites a 2010 study by Urban Futures (a think-tank whose numerous real estate industry clients include Bob Rennie) that sought to identify “foreign investors”  via the addresses to which Vancouver  property assessments were sent. If an owner’s contact address were overseas, that would be a good proxy for foreign ownership, went the reasoning. Unsurprisingly, the rate was low: just 0.4 per cent of assessments were sent outside Canada.
But it’s a bogus proxy. Why would a foreign owner capable of buying an “investment” property in Vancouver NOT have a contact address of some sort in Canada (say, a lawyer, accountant, property manager, or a relative)  – and particularly if that owner was a Chinese national illicitly circumventing the nation’s cash-export restrictions to buy a home overseas? That such a person would blithely have their Vancouver tax assessment sent to them in China defies common sense.
The last rotten plank upon which the BCREA builds its 5 per cent conclusion is its own “informal monthly poll” of realtors who are asked to identify whether their clients are “foreign investors”.  Never mind the fact that the result, 3.2 per cent, wildly exceeds the Urban Futures estimation of the same group (0.4 per cent) by 700 per cent. It doesn’t really matter, because, once again, the “foreign investor” designation neatly excludes foreign owner-occupiers, as well as all wealthy immigrants, regardless of whether they are investors or not.

Clarity is a foreign concept

Let’s consider just how pointless the BCREA’s definitions really are, in light of a couple of high-profile cases.
Lai Changxing signs his arrest warrant after arriving in Beijing on a flight from Vancouver in 2011. Photo: Xinhua
Lai Changxing is a convicted smuggler now serving a life sentence in China. He initially fled to Vancouver in 1999 with his wife and family, and, according to the Globe and Mail, paid C$1.3 million for a home in South Granville, despite having no income source in Canada.
Yet Lai and his dirty cash would escape all of the BCREA’s various designations of “foreignness”. For a start, Lai was an owner-occupier. His property wasn’t for “investment” purposes. And, if asked by a census taker whether he considered Canada to be his place of primary residence, Lai would most certainly have said yes (he never achieved permanent residency, but staged a long battle for refugee status).  I rather doubt he ever had his Vancouver property tax assessment sent back to Xiamen.
How about a more recent case, that of duck farmer-turned-tycoon Chen Mailin, who paid C$51.8 million for a vast mansion in Point Grey? (I hasten to add, there is no suggestion of criminality here, unlike Lai’s case)
Jiangsu-based businessman Chen Mailin and the mansion he recently bought at 4787 Drummond Drive. Graphic: SCMP Pictures 
The home at 4787 Drummond Drive is in Chen’s name. This makes it virtually certain Chen has previously attained residency in Canada, since a Chinese resident is generally prohibited from exporting more than US$50,000 per year – unless they apply for exemption on the grounds that they are emigrating.
It’s not clear whether Chen actually spends much time at Drummond Drive, since he remains the head of his Jiangsu-based Nanjing Dingye Investment Group. His business operations in Canada are scant-to-non-existent. But regardless: Canadian residency means he’s not “foreign”. The home is believed to be occupied by family members and is hence not an “investment” property.
The point here is not to demonise folk like Chen Mailin, who is well within his rights to seek a fine and comfortable life in Vancouver for his family, while making his living in China (tax issues notwithstanding). His is an extreme case. But it’s not just the impact of mega-buyers like Chen being excluded from the affordability issue by the BCREA’s definitions - it’s the impact of thousands of standard-issue millionaire migrants who flock to Vancouver.
The BCREA’s approach is grossly misleading if the goal is to understand the impact of foreign money on housing affordability.  Putting it on Ministry of Finance letterhead and calling it “analysis” doesn’t make it any less so.
The Hongcouver blog is devoted to the hybrid culture of its namesake cities: Hong Kong and Vancouver. All story ideas and comments are welcome. Connect with me by email or on Twitter, @ianjamesyoung70.

Chinese Characteristics

Many of these new wealthy like to show off as they do in China.   For example: