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Is it time to invest?: looking to China and beyond

How do you invest during a crisis? We look to China and other foreign cities for property investment upsides.

The Chinese word for crisis is “危机 (wēi jī)”. Wēi means ”danger” while “jī”, interestingly, means ”opportunity”. Being ground zero of the Covid-19 pandemic, buying properties in China may not be at the top of most people’s minds right now but a gutsy investor could be entering the market at the most opportune time.

Covid-19 has undoubtedly hit the property industry on a global level. In China, the temporary closures of many businesses affected manpower and the construction material supply chain. In early 2020, most physical sales galleries were closed.

According to Hoon Teck Ming, group managing director of GuocoLand China, developers quickly adopted online sales galleries with live-stream introductions by sales staff. However, Hoon predicts that even with such initiatives, sales are expected to be lower than usual. So, while it might sound counter-intuitive, this might be the best time to look for a great deal.

What should one pay attention to then when investing in the Chinese property market, especially during these volatile times? We glean insights from Hoon.

 

property investment

Artist impression: The Chongqing 18 Steps project is a large-scale, mixed-use development that’s next to the Jiefangbei CBD. It’s slated for completion in 2023.

 

(Related: Why Thai property giant Sansiri’s CEO Apichart Chutrakul is diversifying the company with multiple collaborations)

 

Learn from the past

While the world battles – and, hopefully, recovers soon – from Covid-19, it is worth learning from the effects of Sars on China’s property market in 2003. “Back then, residential sales transactions went down by 5 per cent in Beijing and Guangdong, both of which had the most Covid-19 cases, as compared to 2002.

“This was lower than the national growth rate of 6.8 per cent in 2003. However, there was no significant decline in the other provinces, which recorded low to moderate numbers of infections,” notes Hoon.

Of course, Covid-19 has affected many more parts of China and the world than Sars did and while the number of sales transactions always dip during challenging times, GuocoLand’s observation, based on the Sars outbreak, is that buying interest always returns to the property market. Assess all factors carefully The oft-quoted ”location, location, location” is a key factor in property investment.

Assess a property’s accessibility, transport connectivity and proximity to amenities. “Increasingly, people are placing higher importance on the availability of common facilities for leisure and recreation within the development, the proximity to reputable schools and educational institutions, as well as the quality of property management,” says Hoon.

Besides efficient and flexible unit layouts, he advises prospective buyers to also look into the quality and safety of construction.

property investment

Another artist’s impression of the Chongqing 18 Steps project.

Last but not least, consider the developer’s reputation and track record of past projects. For example, GuocoLand China, which has been developing properties in Beijing, Shanghai, Nanjing and Tianjin since 1994, has always focused on optimising the use of its resources and improving the health and safety aspects at project sites instead of concentrating purely on maximising cost efficiencies.

Look out for healthy, long-term demand Property development is a business with long project timelines. Hence, developers hold a long-term view and do not usually drop prices drastically because of short-term impacts. Covid-19 or not, you should buy only if you are confident of holding onto your investment for a few years and can wait out any possible slump in the market. “There remains a healthy underlying demand for quality homes and offices in Shanghai and Chongqing,” highlights Hoon.

To help meet that demand, GuocoLand China has launched two mixed-use developments, Chongqing 18 Steps in Chongqing and Guoco Changfeng City in Shanghai.

property investment

An artist’s impression of Guoco Changfeng City in Shanghai.

(Related: Singapore hotels introduce unusual property upgrades in bid to stay relevant)

 

Region to watch: Chongqing

Why you should invest

With the gradual opening up of this highland region, Chongqing, the only inland municipality in China, boasts huge spaces for investment and development. Strategically located in China’s geometrical centre, it is well-positioned to play a leading role in connecting the global development strategy, Belt and Road Initiative, to the Yangtze River Economic Belt.

Chongqing achieved an estimated 6.3 per cent year-on-year growth of its GDP in 2019. Its foreign capital in actual use has exceeded US$10 billion (S$14.2 billion) for the past few consecutive years. The rapid economic growth coupled with an industrial restructuring has led to a strong demand for talent.

“With large numbers of high-level talents coming to Chongqing and residents looking to upgrade their housing and living environments, there is a huge demand for high-end residential properties,” says Hoon, highlighting that the average price of high-end residential properties increased by almost 30 per cent from 2014 to 2019.

Besides its ongoing Chongqing 18 Steps project, GuocoLand China also became part of Chongqing’s Go North urban expansion initiative when it acquired four land parcels last year in a joint venture with Hong Leong Holdings (China).

Situated in Liangjiang Xinqu New Area of the Yubei District for residential development, they span a land area of 141,968 sqm with a total above-ground gross floor area of 197,600 sqm, and are close to Chongqing Jiangbei International Airport and Chongqing Central Park, the third-largest city park in the world after New York City’s Central Park and London’s Hyde Park.

About Chongqing 18 Steps

This large-scale, mixed-use development next to the Jiefangbei CBD, Yuzhong District, comprises residential and commercial components with a total gross floor area of 341,000 sqm. Slated for completion in 2023, it will have over 1,000 luxurious modern apartments in five high-rise residential towers, with the tallest peaking at 193m and boasting views of Yangtze River.

It is well served by an extensive transportation network comprising major arterial roads, underground thoroughfares, two metro lines and bus services that connect the development to the other areas of the Chongqing municipality such as the key districts of Jiangbei and Nan’an. And when the new subway metro lines are completed in future, there will even be new station exits located right next to home.

(Related: How Thai property developer Sansiri is enticing the next generation of luxury-home buyers)

 

Region to watch: Shanghai

Why you should invest

With ambitious plans to become the global centre for economy, finance, trade, shipping and scientific and technological innovation, the cosmopolitan city of Shanghai has been one of the fastest-developing cities in the world. In 2019, Shanghai’s GDP grew by 6 per cent to US$553.8 billion. Approximately 6,800 foreign direct investment contracts were signed – an increase of 21.5 per cent from 2018.

From Singapore alone, the contract value of direct investment shot up by 61.9 per cent. And real estate investment in Shanghai remained above US$14.54 billion for the fourth consecutive year as investors remained generally positive about the city’s long-term outlook. Throughout 2019, offices remained the most sought-after property, accounting for 58.7 per cent of total sales.

About Guoco Changfeng City

Having developed and sold several quality properties in Changfeng such as office towers, SOHO (small office home office) units, serviced apartments and residences, GuocoLand China has an established presence here. Its new large-scale, mixed-use development on a prime site in Changfeng in Putuo District comprises two 18-storey Grade A office towers, two low-rise office buildings and a supporting retail, entertainment and cultural centre across 195,000 sqm.

Tenants and residents working and living in the area will enjoy a variety of dining and lifestyle options. This development also boasts green building elements such as energy- and water-saving features and environmentally friendly materials.

When completed in 2021, investors will enjoy excellent connectivity as Guoco Changfeng City will be integrated with a direct connection to an upcoming metro station of Shanghai’s Metro Line 1 that’s scheduled to open this year.

 

property investment

Due to Covid-19, property developers quickly rolled out virtual showrooms.

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Star picks

Not keen on China? Ismail Gafoor, CEO of PropNex Realty, offers his picks of other cities worth investing in.

 

Emerging market pick #1: Cambodia

It has a high GDP growth rate (approximately 7 per cent) and a relatively young and growing population. Focus on prime retail, office, hotels and serviced apartments.

Recommended projects: In Phnom Penh, The Peak by Oxley, a retail mall managed by CapitaLand, is offering a 5.5 per cent Guaranteed Rate of Return (GRR) based on a 10-year average. Or look into Flatiron, a prime office and apartment hotel managed by Citadines (Ascott Group), with a 10-year GRR that averages 8.5 per cent per annum by Citadines or 9.5 per cent per annum for the office.

 

Emerging market pick #2: Vietnam

It has one of the largest populations among Asean countries, a GDP growth of above 6 per cent and an expanding manufacturing hub.

Recommended project: The Marq by Hongkong Land, a rare high-end residential development in the prime District 1 in Ho Chi Minh City.

 

Developed market pick #1: Tokyo, Japan

The Greater Tokyo Area is the world’s largest megacity with a population of approximately 38 million and a highly skilled and regulated market. The upcoming Olympics (despite its postponement to 2021), the 2025 World Expo in Osaka and the potential opening of casinos and integrated resorts, have positioned Japan as an attractive and safe destination for property investment.

Recommended project: Resale apartments in prime wards.

 

Developed market pick #2: London, UK

With the finalisation of Brexit, lingering uncertainties will start to settle. Thus, we can expect a stable domestic demand. The weakening pound against the Singapore dollar also plays to our advantage.

Recommended project: White City Living by the Berkeley Group in West London W12. Just 15 minutes away from Central London, this new development offers over 2,300 new homes, including suites, apartments and penthouses.

 

(Related: Three luxury property launches to look out for in 2020)