“I don’t really hold a positive attitude toward real estate industry in China. I’d rather resemble it as another Titanic which is running into an iceberg.” Pan Shiyi, chairman and co-founder of SOHO China said on a forum for Chinese entrepreneurs on 23rd, May, “If so, it would render not only real estate business but also financial industry risky,” he added.
As a tycoon in real estate industry, it’s not likely for Pan to avoid questions related to housing price. “Honestly, I’m not positive toward it, despite the recent theoretical analysis from property developers and scholars represented by Ren Zhiqiang,” he points out, “I don’t take their words, and also, we are not supposed to when dealing with market.”
So, what will serve as an effective solution? Pan suggests that we pitch into the market and see for ourselves, for market is far more complicated than theories. “Under these circumstances, what I actually observe and come up with is more reliable as well as the statistical data (not from the National Bureau of Statistics, of course)”. Pan explains.
Pan applies three reasons for the drop of housing price he predicts. First of all, property supply will increase due to the introduction of real estate registration, leading to the downside of housing price. He illustrates, “It is more concealed or unexposed to hold possessions in form of RMB if the registration of real estate is employed. Even pounds and U.S. dollars are safer. This is universally acknowledged.”
Second, the implement of building taxes also contributes to the price drop. “There are people who possess over 20 houses, even those who possess over 100 houses, which haven’t been rent yet.” Pan demonstrates, “This will not be the case if holding cost increases due to the implement of building taxes, which will impel these property owners to rent their houses, thus causing the increase of housing supply and the drop of housing price.”
Third, it was brought up in the resolutions of the third plenary session that collective construction land in rural areas should have the same opportunity to enter the market and the same price as state-owned land. Pan exemplifies that the construction land in the rural areas in Beijing reaches 1006 square kilometers, equivalent to more than 250 the size of Beijing CBDs (which is 4 square kilometers). Hence, land supply is absolutely considerable.
Besides, Pan also admits that financial products, instead of bank loan, will be the first to be affected if something goes wrong with real estate industry.
“Trust business, third-party financial planning and entrusted deposit are all characterized by high interest rates and poor qualities. Although it seems that real estate developers show willingness to ask for a loan at such high rates, their fund supplies, actually, are quite insufficient. These problems are to be exposed when property price drops by 20~30%.” Pan says.
Plus, at the beginning of this year, SOHO China made two real estate deals, recouping a remarkable amount of fund (5.23 billion RMB), which intensified the market combined with the remark “withdrawing capital and turning it into money” claimed to be put forward by Li Ka-shing.
This, Pan says, may be offensive to some government officials. Thus, he declares himself that he thinks highly of China’s bright future and the economic growth. Nevertheless, he leaves out the comment on domestic real estate industry, maybe intentionally.
Source: ifeng.com