No LUV for China real estate, SOHO says

November 6, 2008

China’s real estate sector has a chilly winter ahead, said Pan Shiyi, chairman of Beijing property developer SOHO China Ltd. And he had interesting, alphabetical way of describing it.

“I look at the shape of the real estate market and I imagine it bottoming out as a letter “L”. If after the snows earlier this year, China had loosed up its monetary policy, we would have seen a “V”-shaped market. If they had loosened up before the Olympics, we would have seen a “U”. But for them to release new policies now, like reducing the interest rate, it’s already an “L”. I don’t know when the market will come back up.”

More pressure will come to bear on Beijing’s property market, especially the market for lower-end, residential units, as projects built on land released for development in 2007 are completed, Pan said, speaking at the Reuters China Summit in Beijing on Thursday.

“Most developers are building common, residential units. As these units come onto the market, they will deal it a huge hammer blow,” Pan said, adding that China’s policy since late-2006 of promoting the construction of residential units of less than 90 square meters would soon be felt.

“This year in the fourth quarter, the effect of this policy will hit the market and reshape it…. The price pressure will be biggest first on real estate outside the fifth ring road, second on units 90 square meters and below, and lastly on those priced at 8,000 a square meter or more.”

By Lucy Hornby

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