PERE Asia: China residential market at the bottom

Now is a good time to invest in Chinese residential because construction and land prices are down, according to a panel at the annual PERE Asia summit in Hong Kong.  

China's residential real estate market has reached its nadir and will not improve for the next 18 to 24 months, Tom Delatour, chief executive officer of Century Bridge Capital, said at the PERE Asia summit in Hong Kong.

Delatour, who was speaking on a panel discussing the economic slowdown in China, said that he doesn't expect the property market in the country to witness any drastic change this year and that it will “bounce along the bottom”.

“The January housing sales price data of the top 70 cities saw around 20 cities recording month-on-month decreases. For an investor, now is a good time because construction and land prices are down.”

Delatour said many investors are approaching China with a herd mentality that occurs at the time of a downturn.

Russell Platt, co-founder and chief executive officer of Forum Partners, echoed Delatour's view.

“It is the irony of capital markets adjustments that investors have turned their backs on the market at a time when prices are beginning to look attractive and the vacancy rates are at a point when investors should be coming in.”

In Platt's view there is also a growing opportunity to build RMB lending platforms in China, especially since most foreign investors are currently using offshore structures to lend across the capital stack to Chinese developers. He added that Forum Partners is working towards building a satellite operation that will have an onshore lending capability.

Several policy measures have been put in place to “moderate the cycle”, as Delatour put it, and arrest the decline in housing prices. For example, the government has been trying to soak up some of the excess supply in certain markets by buying residential units for social housing. In other places like Chenyang, college graduates are reportedly being given a zero percent down payment on their housing loans to spur up the market.