Home prices may post a “single-digit” decline this year, said Lo, chairman of Shui On Land Ltd. (272), a Shanghai-based developer. Property values in the nation’s city centers will hold up, he said, adding that he doesn’t expect a property crash this year.
“I don’t want them to relax the property curbs immediately because the market will be completely chaotic,” Lo said in an interview in Beijing yesterday. “There’s so much pent-up demand.”
China’s falling prices have already prompted brokerages including Morgan Stanley and UBS AG to speculate on an easing in housing curbs this year. JPMorgan Chase & Co. said this week the “worst is behind us” for the nation’s property market.
February home prices posted the biggest drop in 19 months as the government pledged to maintain property curbs, according to SouFun Holdings Ltd. (SFUN), the nation’s largest real-estate website owner.
Jing Ulrich, managing director and chairman of global markets for China at JPMorgan, said at a conference in Hong Kong on March 7 that home prices and transactions may improve in the second half. Her comments came a week after Morgan Stanley said some curbs may be eased as early as the end of the first quarter, while UBS AG said earlier this year the measures may be lifted mid-year to prevent a collapse of the residential market.
‘Critical Stage’
Regulation of the real estate market is at a “crucial stage,” Premier Wen Jiabao said in his work report to the National People’s Congress on March 5.
“Unless something dramatic happens in the international economy, these more restrictive measures will remain for at least another 18 months,” Lo said. When the government decides to ease its curbs, “it will be in a typical Chinese way: they won’t say let’s relax, but will do it quietly without disturbing the overall economy,” he said.
Lo, a member of the Chinese People’s Political Consultative Conference, is in Beijing attending its annual week-long meeting. The conference is an advisory body to the People’s Congress, the highest governmental body in the country.
Chinese developers are going through a rough time as sales fell following the two-year efforts to rein in property prices, Lo said. The measures included higher down payments and mortgage rates, as well as home purchase restrictions in about 40 cities.
Credit Downgrades
The nation’s developers will probably face more credit rating downgrades over the next six months as refinancing risks increase, according to Standard & Poor’s. Home prices may fall 10 percent by June from a year earlier, according to an S&P report yesterday that said “the worst is yet to come” for developers.
Home prices in China’s seven or eight biggest cities must decline, Securities Times reported yesterday, citing Housing Minister Jiang Weixin. The Shanghai Securities News cited Jiang as saying that the government will “resolutely” continue with its housing curbs and won’t ease home-purchase restrictions in the near term.
Spin Off
Shui On plans to spin off its Chinese commercial property leasing business by the end of this year in an initial public offering in Hong Kong, said Lo, who’s ranked the 25th richest person in the city by Forbes magazine, with an estimated net worth of $1.46 billion.
The company will not be set up as a real estate investment trust. It doesn’t want to just collect rents and distribute dividends, he said, adding that it’s ready to appoint investment banks for the share sale.
Shui On will increase its land holdings this year, Lo said. The company is set to complete about 1 million square meters (10.76 million square feet) of commercial and residential projects in 2012, he said.
Lo, the youngest son of late Hong Kong property tycoon Lo Ying-shek, is known as “Mister Shanghai” after turning the city’s century-old homes into a pub and entertainment district called Xintiandi, which means New Heaven and Earth in Chinese.
The concern for the housing markets in both China and Hong Kong is the lack of lower-cost homes for the masses, Lo said.
“Home prices in Hong Kong at the moment are beyond affordability of normal families,” he said. “We shouldn’t look at the matter from developers’ perspective but the overall society, even though I’m a developer myself.”
To contact Bloomberg News staff for this story: Bonnie Cao in Shanghai at bcao4@bloomberg.net
To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net
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