CapitaLand to double portfolio in China in 5 years, Lim says: Update

CapitaLand, which has $10.4 billion of assets in China, said it’s aiming to double its portfolio in the country in the next five years as it expects the economy to expand over the next decade.

CapitaLand, Southeast Asia’s biggest developer, expects new investments in all sectors in the country, including apartments, shopping malls, serviced residences and the “Raffles City” brand of office and retail developments, Chief Opera1ting Officer Lim Ming Yan in an interview in Singapore yesterday.
“China’s market is very big and it’s growing very fast,” said Lim, who was chief executive officer of CapitaLand’s operations in China from 2000 to 2009. “We will continue to invest significantly in real estate sectors globally, and China will be a major one.”

 

China overtook Singapore as CapitaLand’s biggest market by assets in the first quarter, making up 37% of its holdings, followed by 35% in the city-state. The Singapore-based company expects to expand in its key markets with the capacity to invest a further $2 billion this year, based on the $6 billion spent on new investments globally in 2010, Lim said.

 

CapitaLand shares climbed 3.3% to $2.85 at the 5:05 p.m. close in Singapore, the third-best performer on the city’s benchmark Straits Times Index and its biggest one-day gain in more than three months.

 

MALLS, SERVICED APARTMENTS

Ascott Holdings, the company’s serviced residence operator, plans to almost double its portfolio in China to 12,000 from 6,600 apartment units by 2015, while CapitaMalls Asia, its shopping mall unit, aims to double its holdings to 100 malls from 53 within three to five years, it said. China’s retail sales rose 16.9% in May and foreign direct investment surged 13.4% to $9.2 billion, according to government data.

 

The expansion into China comes as the country is stepping up property curbs amid concerns prices are becoming unaffordable. The central bank on June 14 ordered banks to hold more money as reserves for the sixth time in 2011 as it fights to contain inflation.

 

Chinese developers’ outlook was cut to “negative” from “stable” by Standard & Poor’s on June 15 on concern tighter credit and further curbs may lead to rating downgrades in the next year. Property sales may start to slow as the policy “starts to bite,” leading to price cuts that may drive home prices 10% lower in the next year, S&P said.

VALUE HOMES

CapitaLand’s residential projects in China accounted for 12% of its global portfolio, and it has formed a separate unit to build so-called value homes in the country to tap on demand for lower-priced apartments after focusing on the mid to high-end housing market, Lim said.

 

China last month said it will maintain curbs after intensifying measures this year with higher minimum down payments for second-homes and residential property taxes in Shanghai and Chongqing.

 

“The policy is effective,” said Lim, who expects home prices to “moderate” by as much as 5% in the second half in some Chinese cities. “Price increases have moderated significantly. Volume has dropped.”

 

China’s new home prices in May rose in 67 out of 70 cities that the government monitors, while those for existing apartments started to cool with 23 cities posting a month-on- month decline, compared with 16 in April, according to the statistics bureau’s report on June 18.

 

CapitaLand obtained a site in the central Chinese city of Wuhan and plans to start building its value homes as early as the end of this year, Lim said. It’s also seeking opportunities for similar projects in the southern business hub of Guangzhou, Lim said, declining to be specific on how much these low-cost homes will account for the company’s portfolio.

 

“We just don’t want to have big swimming pools and other additional facilities for those homes so we can sell at low price and address to that lower-end market,” Lim said.