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FOR years, Chinese property has been a sure bet for savvy investors looking to ride the country’s economic surge.
Now, some of the best-known names in Chinese investing are cutting back, at least for the present.
Since September, Hong Kong tycoon Li Ka-shing, widely considered Asia’s richest man, has sold office and shopping-mall projects in the cities of Shanghai and Guangzhou. His son, businessman Richard Li, sold a prime piece of real estate, a mixed-use complex in Beijing’s Sanlitun shopping district, for US$928 million in early April.
Soho China Ltd., which develops property only in Beijing and Shanghai, sold two office projects in Shanghai in February for 5.23 billion yuan (US$837 million) in total.
The move to sell real estate projects “is looking like a really smart call right now,” said Colin Bogar, managing director of real estate private equity firm MGI Pacific. Hutchison Whampoa Ltd., one of the elder Li’s main property businesses, didn’t respond to several requests for comment.
The Chinese property market appears to be softening along with the rest of the country’s economy. Developers are cutting residential prices in small cities as economists warn of overcapacity. Many property companies are also facing tightening credit, lower returns, slower demand for homes and intensifying competition amid a deepening supply glut.
According to property consulting company Savills China, the average selling price of Grade-A office space in Shanghai reached 60,000 yuan per square meter in March, up 1.4 percent from a year earlier and up 65 percent since March 2010.
But rents haven’t grown as quickly. In Beijing and Shanghai, average gross yields on office buildings have fallen from a year earlier, according to data from property agency Cushman & Wakefield. Those in Beijing are well below 2008 levels, and those in Shanghai are only slightly higher.
More property developers are going abroad in search of fatter profit margins, according to Zhang Xin, Soho China’s chief executive officer. (SD-Agencies)
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