James T. Areddy
Over the past few weeks, observers of China’s real estate industry have been treated to songs of woe from analysts, regulators, andStandard & Poor’s rating agency.
But the tune carries further when a Chinese real-estate rock star is singing the blues.
Zhang Xin, the chief executive officer of Soho China Ltd., said Wednesday that in her 17 years in the residential property business she hasn’t faced such a tough market. “This by far the most challenging year in terms of what you can sell,” Ms. Zhang told the Foreign Correspondents Club Shanghai.
Referring to the higher ends of the market, where Soho focuses, she said, “you’re seeing no transactions on the residential side.”
The 46-year-old Ms. Zhang is half of the glamour couple that leads Soho, a Beijing-based developer known for apartments and office buildings that look equal parts IKEA and Star Trek. The former investment banker’s partnership in Soho with husband Pan Shiyi has made them among the country’s wealthiest people.
Echoing complaints she and her husband have made on their Weibo accounts, Ms. Zhang pinned blame for the current slump on government policy, saying developers and buyers alike have no access to credit as Beijing takes aim at inflation and affordability. The industry is “so policy dictated,” Ms. Zhang said, “you spend more time guessing about policy than actually doing your own business.”
She expressed discomfort at Beijing’s efforts to build vast quantities of social housing – “contrary to what they’ve been doing for 15 years” – scoffing that some apartments will rent as low as 70 yuan per month, or about $11. From Ms. Zhang’s PowerPoint slides, she made clear a preference for prices like the 50,000 yuan per square meter that Soho fetched for apartments sold in August, attracting a mob of buyers.
Tight monetary and investment conditions won’t last in the Chinese property market, Ms. Zhang forecast. Pressed to predict when Chinese leaders will loosen their grip, she suggested a window of six months. “Very soon,” she said.
Ms. Zhang kept her commentary spicy Wednesday–there is a reason 2.4 million users track the messages she blasts to Weibo from her white Blackberry. She spoke of a fast-consolidating property market that is stoking “social unrest,” governed by usurious 50% interest rates from underground banks–and, in some cases, she said, inciting suicide.
Things aren’t all glum. Continued jack-hammering from the street outside the boutique hotel where Ms. Zhang spoke Wednesday attested to the fact that development hasn’t stopped in China.
And Soho keeps buying and building, especially in Shanghai these days.
Ms. Zhang showed a video of designs from architect Zaha Hadid with futuristic office buildings that roughly resemble the bullet trains that exit the railway station near where the development is just getting going, Shanghai’s Hongqiao Transportation Hub.
Soho, Ms. Zhang said, has spent 11.4 billion yuan in 2011 making property acquisitions in Shanghai, all of it commercial. She said the government restrictions on residential development make office buildings a safer bet.
The company branched into Shanghai from Beijing when, she said, Morgan Stanley unloaded some property in the east coast city in 2009. Soho is now looking at Guangzhou and Shenzhen, according to Ms. Zhang.
– James T. Areddy. Follow him on Twitter @jamestareddy