Guocoland Ltd, a Singapore-based property developer, plans to double its investment in the China property market to more than US$9 billion on confidence that government’s efforts to lift property bubble will work.
Guocoland, whose projects include apartments, hotels, shopping malls and offices, said last year that it planned to invest 33 billion yuan or S$6.6 billion in new commercial properties in China.
“We should very easily double that,” said Violet Lee, head of Guocoland’s China operations. “We have much more confidence now because we can sense the central government is taking things very seriously.”
Last month, the Chinese government ordered several state-owned companies to halt property development if it is not part of their main business, creating an opportunity for some foreign developers.
“The recent policies focus on curbing demand, but China’s urbanization and the rising demand for housing are still there over the long term,” said Dai Fang, an analyst from Zheshang Securities Co. “With the expectation of a yuan appreciation, it also makes sense for foreign companies to build up investment in China.”
The new investment of Guocoland will mainly focus on integrated projects in major cities like Shanghai and Beijing, and several provincial centres, said Ms. Lee. Guocoland is also considering expanding its land holdings.
The developer, which is controlled by Malaysian billionaire Quek Leng Chan, aims to increase its investment over the next two years. Ms. Lee sees a “big, big opportunity” in the Chinese government’s decision that 78 state-owned companies exit the real estate market because property developments are not part of their main business.
Guocoland plans to take advantage of this through “mutually beneficially working relationships,” Ms. Lee said.
China previously ordered developers not to take deposits for uncompleted apartment sales without proper approvals, and barred them from charging “abnormally high” prices. Property prices in Haikou, the capital of Hainan, climbed 53.9 percent last month.
The average land cost in 105 Chinese cities jumped 8.1 percent in the first quarter to 2,700 yuan per sq m, said the Ministry of Land and Resources.
“We’re looking at crazy prices,” said Ms. Lee. “A lot of land prices are beyond what the market can accept. The flour is more expensive than the bread.” Ms. Lee added that the government’s measure to cool down the housing market will not have “major impact” on Guocoland, as it targets residential developments rather that the company’s main operations.