Beijing
developer Soho China says rents in the capital are too high to sustain and may
see a sharp correction.
Chairman and co-chief executive Pan Shiyi said Beijing property prices were affordable
but rents had reached unreasonable levels.
"Rents in Beijing are unreasonable and have to come down. But prices will
rise," he said.
Mr Pan would not make a forecast but said that even if rents for offices and flats
fell 50 to 60 per cent, the investment yield would remain very high.
He said the average rental yield in Beijing was more than 10 per cent and the
return of his company's projects was even higher, at 15per cent or more.
His wife, co-chief executive Zhang Xin, said Beijing's rental level was abnormal
and rentals generated from a property more than doubled mortgage outlay. "In
Hong Kong, rents may not be able to cover the mortgage while in New York and London,
they basically even out," she said.
Premier Zhu Rongji reportedly expressed concern late last year that a speculative
property bubble had emerged in certain regions of China.
However, Mr Pan said there were no signs of a bubble building in Beijing's property
market as there was no rampant speculation on sale and purchase.
He said prices had not increased too much in the past three years, with most buyers
being end-users.
There was room for prices to rise further in Beijing; especially with the massive
infrastructure developments arising from the 2008 Olympics stimulating property
market growth.
Soho China, which withdrew a New York listing application this week, was understood
to be planning a Hong Kong initial public offering to raise US$100million to US$200 million by the end
of March.
The company recorded a profit of 130 million Yuan (about HK$122.04 million) on
a turnover of 1.8 billion Yuan in 2001, Its profit was 80 million Yuan in 2000with
one billion Yuan turnover.
The group is undertaking a 690,000 square metre upmarket office-retail-residential
development Jianwai Soho in Beijing. It is also engaged in a joint-venture development
in Chaoyang district, comprising logistics facilities, flats, hotel and golf course.
Mr Pan yesterday would not disclose the capital expenditure required for the projects.
However, he said Soho China had sufficient financial resources to cope with its
project requirements, although a listing could speed up expansion.