PERE Forum China: Government likely to keep status quo

Delegates at PERE’s inaugural conference in Beijing were told yesterday how Beijing’s policymakers would be unlikely to add to current restrictive real estate policies during this year’s government transition.

Delegates at the inaugural PERE Forum: China in Beijing were told yesterday how Beijing’s policymakers would be unlikely to add to current restrictive real estate policies during this year’s government transition.
China’s government has been trying to cool recent perceived overheating in property markets, but as Premier We Jiabao and most of the other members of the current Central Committee of the Communist Party of China prepare to give way to successors over the coming 12 months, speakers on stage at the all-day event predicted there would be little further interference until the new government had bedded in.

China has pressed ahead with an array of market-cooling measures, both in terms of financing restrictions for organisations lending to real estate developer and on the investment side particularly in the residential sector. However, Richard Yue, chief executive officer and chief investment officer at Arch Capital Management told around 100 delegates at the Westin Chaoyang Hotel in Beijing how the government’s policies regarding the residential market would stay in place for at least nine-to-12 months. He said: “We’re seeing a transition of government this year so it is very likely the current government would not do anything drastically different and the new government would not do anything right away that is drastically different.”
China’s economic growth forecast has dipped of late, down from 8.9 percent to 8.1 percent from the fourth quarter of 2011 to the first quarter of 2012 and there are predictions of further drops still. But while it was unlikely further restrictions would be introduced, Yue suggested the growth rate would need to fall much further and faster for the government to want to relax current measures.

Delegates also heard how demand for Chinese real estate was still evident and would likely be buoyed by other government measures to inject more life into the economy, such as two interest rate reductions in the space of a month and lower capital reserve requirements for China’s banks. While the banks have not seen real estate restrictions relaxed, lending has flowed more freely in other sectors and as a result consumer confidence was improving.
Howard Zhang, senior investment director at InfraRed Investment Advisors said: “The worst is definitely behind us. There will be no more restrictive policy coming out. The interest rates have been cut and confidence is coming back. We are starting to see investment volumes pick up.”
Investment volumes in China have dipped of late, with property services firm CBRE recently reporting less than $1 billion of commercial real estate transactions took place in the first quarter of the year compared to more than $3 billion in the last quarter of 2011. Residential property sales have also subsided. Yue said China’s real estate markets would not experience a “v-shaped recovery”. But he said: “I think the recovery is going to be gradual but we’ve probably seen the worst and are probably turning the corner.”
Zhang tipped Shanghai and Beijing’s office markets as good places to buy currently given tight supply and returning demand from both international and domestic occupiers. Yue warned however that certain markets remained oversupplied and “dangerous” for those looking to invest in more liquid assets.