(I) DATAGA: MACRO PROJECT IN CHINA “EUROPE ROYALE”

16 September, 2011 No Comments

From the association between Spanish Dataga and Hainan China Railway Construction Investment surges the development of this project.

Spanish real estate developer Dataga will build, according to their data, the largest residential, tourist, and leisure project of the Asian continent. The idea is to build four large residential complexes in the areas of Beijing, Shanghai, Shenzhen and Hainan. The project, referred to as Europe Royale, seeks to recreate the architecture and landscapes of five European countries (Spain, Italy, France, England and Germany).

Believe it or not, this project is to actually build four new cities that will include all necessary services of a city; schools, hospitals, leisure space, tourism, cultural, and sports centers. In a future post I will write about the agreement (7.1.11) closed with RFEF (Spanish soccer federation) to manage the football section of the new City of sports of Europe Royale in Beijing. The first project currently underway is the one to be held in Hebeli, near Beijing.

The developer, in a joint venture with local partners, has agreed to develop the project with Chinese authorities, public and private organisms, and Asian funds and banks. Hainan China Railway Construction Investment, a partially state-owned enterprise, will collaborate in the development of the first project, and Dataga has created a network of Chinese and international offices and companies. For the Beijing project, the initial investment is estimated to be € 10,000 million, of which € 1,900 million will be allocated in the first phase. (Expansion 3.2.11).

The entire project is scheduled to be built in 10 years, working in periods of 24 months with the first property deliveries in 2012. The villas, ranging from 400 to 1,200 square meters, will have an approximate value of 6,000 € / m2, and are targeted to the high-end segment of the Chinese society, without forgetting other potential markets such as Hong Kong, Singapore, Korea and Japan. In addition to the residential area, there will be a financial district, with 25 office buildings, international universities and sport areas.

This major project is one of the pioneers with which the Spanish real estate sector has expanded in the Chinese market. This was possible due to the Chinese law of urbanization that qualified land as state ownership (concession), which did not appeal foreign investors to develop real estate projects in China.

For more information please check:

www.europeroyale.com

(II) HOMES in China

27 August, 2011 No Comments

This post is based on the conclusions of a Spanish entrepreneur who moved with his family to China, and he did his own market research to find a home there.

In China, homes are concessions of 70 years (apparently, they are considering to extend the concession to 90 years). If an investor purchases a brand new home, the concession is for the whole period.

In regards to the Real Estate second hand market;

* If the home is bought in the second hand market, the new owner should subtract the years that the home was previously inhabited to the total period of the concession.
* An interesting fact is that there is small market for rehabilitation of buildings or homes. Chinese are not used to perform regular maintenance to a home (ie; to give maintenance to the building’s garage or facades, or to paint the stairs and the house itself). This leads to visible impairments in a short period of time and therefore the buyer chooses to buy a new apartment or house. (This might be a possible gap in the market that should be carefully studied and be a great business opportunity).
* It could be inferred that second-hand homes in China are not as attractive as new homes. The vast majority tend to search for first hand properties due to the large existing supply across the country. We are talking about an immense market of new homes. However, in the country’s main cities, especially in the city centre (first ring) where the housing market has settled, supply of homes in the second hand market does exist.

The loans offered for the purchase of a home, can amount to 50% of the total investment. NO matter if home prices are fixed, one should always negotiate with the seller, in addition to a 2% discount for early payment. The realtor’s commission is paid by both parties.

Since China is a developing country of considerable size, large cities such as Beijing or Shanghai are not the only ones experiencing this kind of growth, existing cities in the suburbs referred to as “third” or “fourth ring” also follow this trend. These peripheral areas are usually well connected with either high speed trains or a growing subway network.

High speed train networks communicate in a quickly manner people’s homes with the city centers and workplaces. As well as the subway, which makes up the price a house along a station and with good communication (as would happen here).

There are ghost towns, mostly bought by investors who want to own. Taking into account that his mentality is geared toward work all day, have few expenses, and thus, saving. This allowed them to pay a flat to a son (usually one child per family), although now  it is changing, as children salaries are older than the parents’.

In order to appreciate the different areas, despite the large price increase that homes have suffered throughout the country, we see that:

The Hainan Province is a high class residential area with tax advantages. There are promotions of modern design, with resorts and golf courses. It is a very nice, and quite wet area due to its proximity to the sea, located in the south of the country. It is best to buy high apartments and away from the sea to avoid deterioration. The capital, Haikou, and the area of Sanya are also quite expensive. Sanya is a tourist town with an artificial island connected by a bridge. The group of MAD Architects has designed PHOENIX 2, a luxury destination that will be completed by 2014. Since Northern China is very cold, this area is considered a good summer place to spend under the sun. Its target customers are Russian and Northern Chinese. The price of housing in the area is rising at a fast pace, reaching five times its annual price.

Other parts of China are more affordable. Areas that can be a good place to reside are: Guangzhou (near Hong Kong), and Guiling, a beautiful city that will be connected to Shanghai by a high speed train (340km / h), that is still under construction. The price of the area will rise considerably. As of 2010, the highest price to pay would be around 2,000 € / m2, but one can also find housing for 200 € / m2 outside the cities.

Beijing, the capital, has a very extreme weather, such that good conditions only last two months because August can reach up to 40º C. It’s a dense city in terms of people and with high pollution levels. It would be interesting to buy a house in the capital for investment purposes.

(I) HOMES in China

25 August, 2011 No Comments

The Chinese market is a market in which companies from all over the world will settle sooner or later, there will be a predictable increase in investment in homes and offices from foreigners. The average national wage is quite low to be able to rent an apartment or office space, which is why it is not a common alternative among Chinese people. When comparing both options, purchasing a space seems to be cheaper in the long run.

Here are some interesting legal/administrative details for foreign investors looking to buy a property in Beijing (published on the web spanish.china.org.cn). I am not positive; but I suppose that the conditions of foreign real estate investment in Beijing should be similar to the ones in the rest of the country.

Nowadays, it takes a series of permits and requirements that make this transaction a bit more complicated:

1. If you want to purchase a home in Beijing, you would need to request a certificate to the B. Municipal Public Security Bureau of Beijing, and it is mandatory that you have been working or studying in China for at least a year.
2. Foreign companies or organizations that have branches or agencies in Beijing, must certify in a written manner that the homes bought are used only for their own use, and prove their legal status.
3. In the event that the purpose of the purchase of dwellings is to rent, sale, or for commercial use, investors must submit a certificate showing the operations to be performed, and a certificate proving that the company is legally established in the country.
4. Foreign embassies in China, representatives of international organizations, and individuals who possess a “diplomatic status” must present a document from the Ministry of Foreign Affairs in order to buy a home.
5. In other words, what Chinese want is people who buy a home to live there, not for other purposes. They must buy the asset under their name (which, in theory, would exclude the possibility of purchasing it as a foreign corporation).

Real estate market in china

In conclusion, foreigners may only own a house in the capital, Beijing (China), as a dwelling, without the right sell or rent it. The new regulation that limits the real estate investment requires foreign buyers to show that they have been living in the capital for over a year as a student or for work reasons.

To buy a property for investment or business purposes, an investor must first establish a company and obtain approval from the authorities. The Investment in the sector, the constant increase in house prices and its consequences will be discussed in the next post.

Future real estate bubble in China?

21 May, 2010 No Comments

This year 2010 is very complicated for the Chinese economy, due to issues related to the appreciation of the Yuan, inflation and the growth of house prices , as discussed in the article on BBC news.

To stop the current speculation in the Chinese real estate sector, the Government has taken several measures to avoid the rise in housing prices, including:

• Increase the first payment from buyers of second homes to a minimum of 50%.
• The State Council called on banks to stop lending money to buyers of residential properties for third properties and do not grant loans to buyers who do not show evidence of at least 1 year of residence in China.
• Increase the provision of land for development.
• Strengthen controls on financing real estate companies.
• Instruct the developers to not monopolize properties in order to drive up prices (Beijing has been limited to a purchase of new construction homes to its residents).

Given these measures to suppress the increases in housing prices,some investors are rushing to sell their property while prices remain high. Many real estate speculators who invested in Shanghai and Beijing began to sell their homes since March 2010, so that the number of properties for sale increased significantly.

Today, although China’s society is very conservative, have also introduced measures to regulate the granting of mortgages, because the new generation, western-minded, have no problem asking credit cards and mortgages (previous generations requested financial support to the family and there was not much demand for banking products).

Another issue that has helped the growth of demand and therefore prices to remain higher, is that Chinese society in matters of family is very traditional and many marriages can not be held if the couple has no home ownership . This has led to the problem of the relationship between salaries and house prices in major cities is increasing. The solution given by government is to create public housing parks to facilitate access to citizens with lower purchasing power.