毕马威-中国房地产简报

1 China Real Estate Briefi ng REAL ESTATE China Real Estate Briefi ng September 2009 China’s real estate sector remains resilient in the midst of a global economic downturn. Property valuations in China have remained resilient over the past 12 months and the value of bricks and mortar investments has not declined at the scale initially expected, despite the weakening of markets globally. At the outset of the economic downturn, many market participants had predicted bankruptcies and widespread consolidation in the real estate sector, particularly amongst mid-sized property developers. This has not happened however, as China’s government measures and bank lending helped to boost liquidity across sectors. If anything, real estate has emerged as one of the main benefi ciaries, as China’s policymakers encouraged infrastructure spending and domestic banks stepped up lending to PRC property developers. The decision to maintain China’s GDP growth target at 8 percent has also encouraged developers to continue to build and expand. This is a shift in an approach which in the past few years featured restrictive measures on property investments to limit speculation and over-heating in China’s real estate market. Record lending and strong demand for homes has seen property sales in the mainland surge 60 percent in the fi rst seven months of this year. There has been a large increase in overall bank lending in 2009, amounting to RMB 7.4 trillion in the fi rst half of the year, compared with RMB 2.5 trillion in 2008, and RMB 5 trillion originally targeted for the whole of 2009.1 Whilst the lending momentum slowed in July on expressed concerns regarding the levels on lending, the government has indicated that it will maintain a relatively open monetary stance. Policymakers also continue to keep a watchful eye for signs of infl ationary pressures. 1 Source: “Money and Credit Record Rapid Growth and Liquidity in the Banking System is Abundant,” The People’s Bank of China website, 15 July 2009 © 2009 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 2 China Real Estate Briefi ng “The incidence of distressed property assets has turned out to be less than initially envisaged. A combination of relaxing of cooling measures and local bank lending appears to have stabilised the situation.” Andrew Weir, Partner in charge Real Estate, KPMG China Investors on the lookout to snap up onshore assets may see buying opportunities in the coming months, as some of the large international institutions that made principal investments on their balance sheets look to exit those assets. Funds that are subject to large redemption calls or other pressures by their investors may also try to realise assets. Re-financing situations While China has not seen a crash in asset prices, the market has witnessed a slowdown in stock market listings (albeit access to the IPO equity markets is now open again with a number of recent new listings and a revival in the pipeline). This has in turn given rise to refi nancing situations, particularly for developers with signifi cant offshore non-PRC fi nancing structures and those facing obligations from bond and similar structured fi nancings. There may therefore be a need for companies with signifi cant offshore debts to restructure, in order to revisit the terms of the debt. This may involve paying some of the debt back at a discount or extending the time period to make payments and/or to facilitate the conditions for a stock market listing. They are in the most part seeking advice in terms of how to restructure and readjust their balance sheets and to deal with managing the terms of their offshore fi nancing. Domestic capital is also increasingly being deployed as Chinese banks now offer competitive onshore loans although using these funds to service offshore obligations is not straightforward. China’s real estate sector presents opportunities to restructure and make use of potentially cheaper debt, as well as challenges in dealing with complex fi nancial structures that comprise both foreign and local debt, a multitude of stakeholders and customary fi nancial covenants. © 2009 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 3 China Real Estate Briefi ng “Domestic property developers have benefitted from domestic banks’ increased willingness to lend. As lending returns to more normal levels, developers will need to continue to seek better financing structures and should welcome the entry of new institutional money, including from insurance funds.” Stephen Ip, Partner, Real Estate, KPMG China The residential sector forms the biggest chunk of China’s real estate market, in terms of equity, investment and lending activities. Residential real estate development is capital intensive and relies heavily on substantial bank debt and pre-sale proceeds to fi nance construction. More sophisticated developers locally are beginning to see the need to better manage their project risks and cash fl ows. Signifi cantly higher interest rates locked in by borrowers in the past two years also drive the need to restructure, particularly for companies that are looking to restructure their offshore debts to seek greater utilisation of potentially lower onshore rates. A new landscape for domestic investors The market is experiencing a sea change for domestic Chinese developers able to borrow cheaper and more freely. The costs of fi nancing for domestic players are lower and it is easier for them to understand, project and quantify development risk, compared to international investors and developers. International institutional investors historically have been willing to pay a premium over local purchasers for prime real estate assets. Times have changed since the global fi nancial crisis and they now tend to be more cautious as cheap credit is harder to fi nd. They have lower expectations on rapid capital growth and are no longer counting on renminbi appreciation as a tool to buffer shortfalls on returns. One of the main challenges for domestic developers, on the other hand, has been securing suffi cient long term lending from other fi nancial institutions and the ample liquidity available in the fi rst part half of 2009 may have been a temporary phenomenon. A major development will be the advent of domestic insurance funds and investment houses coming into play as the regulations permitting domestic institutional investments in real estate are loosened. The sector might start to see developers creating pipelines to local investors, including pension funds and insurance companies, to secure these assets. The pool of domestic players is likely to get signifi cantly larger later this year when insurance funds are able to buy real estate assets as investments. In addition a development of a REIT market continues to be discussed and could present interesting opportunities for domestic retail and institutional investors; it could also support the ongoing development of a domestic property fund management and may also provide a disposal option/pipeline for domestic and existing foreign investors and developers. Tax developments The impetus is towards a level playing fi eld in terms of tax laws for domestic and international investors. Local governments used to rely signifi cantly on revenue from land sales and from land appreciation tax. With a changing economic landscape and with declines in tax revenues from the export sector, tax collection has become a key priority. Notwithstanding earlier liquidity boosts in the banking sector, developers face changing policies, tax enforcement measures and fi nancial lending policies. © 2009 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 4 China Real Estate Briefi ng There have been recent cases, for example, where tax authorities have acted to tax offshore transactions, which has impacted foreign investors. A new corporate income tax law came into effect from January 2008 and tax authorities in China have recently stepped up efforts to apply anti-avoidance provisions against perceived tax avoidance. Domestic investors meanwhile are seeing a tightening of enforcement of the land appreciation tax, which is also likely to impact cash fl ow for developers. This is a progressive tax of 30-60 percent which is charged on profi ts in addition to a corporate income tax levy of 25 percent. Foreign investors additionally need to pay dividend withholding tax, all of which impacts their investment returns. Competition for quality assets Notwithstanding the rapid urbanisation, investable grade commercial property remains in high demand with investors. China’s retail sector could provide a step up the property value ladder for developers looking to diversify from residential- only development, while domestic consumption accounts for a relatively low percentage of total GDP (35 percent for 2008).2 China’s economy continues to rely on fi xed investments (infrastructure and real estate), as well as exports, but increasingly looks to consume its way out of the economic slowdown. Domestic retail sales offer signifi cant potential in the long run. Real estate developers in this sector are set to be direct benefi ciaries as the demand for shopping malls in the large and mid-tier cities continues to rise due to economic growth and increased urbanisation. 2 Source: “The Spend is Nigh,” The Economist, 30 July 2009 © 2009 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. China Real Estate Briefi ng 5 “When considering entry into the real estate sector in China, investors need to focus on due diligence, the investment structure, cash trap and potential tax leakage issues….and to monitor latest developments in regulatory rules, financial lending and tax enforcement.” John Gu, Partner, PRC Tax, KPMG China However, there are also challenges. Many domestic retail developers initially subscribed to the ‘fi eld of dreams’ model of ‘build and they will come’. While this has been successful for some, it may not prove to be sustainable in the long run due to increased competition, as shoppers now can choose between rapidly increasing numbers of retail malls. The Chinese real estate market overall has an estimated 50,000 property developers, and there may be more opportunities for consolidation and acquisition of small-scale developers that need adequate capital and resources although the fragmented nature of the market nationally is expected to continue for some time. As competition in the major cities intensifi es, developers are looking for suitable sites among the popular emerging cities. With ongoing urbanisation, emerging cities will boost demand for various types of properties and this should offer continued opportunities for long-term investors. Industrial properties such as logistics and distribution centres also remain attractive to investors as transport infrastructure nationally also benefi ts from some of the government’s RMB4 trillion-plus stimulus package. The result of these trends is increasing competition for quality assets across China. New Chinese institutional money entering the property market will be on the lookout for investment grade assets that have long leases and secure revenue streams. This is likely to be targeted towards multi-tenant industrial and offi ce buildings and retail projects. However, whilst real estate assets may be increasingly widely available for investment, there continues to be a value gap between what the seller and buyer expects, particularly for quality assets. © 2009 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 6 China Real Estate Briefi ng About KPMG KPMG is a global network of professional fi rms providing audit, tax and advisory services, with an industry focus. With more than 123,000 people worldwide, the aim of KPMG member fi rms is to turn knowledge into value for the benefi t of clients, people, and the capital markets. With over 8,500 employees and 12 offi ces across the country, KPMG China is now one of the largest member fi rms within that network. For over 60 years in this region, KPMG has built a reputation for providing quality services to a wide range of clients in both the private and public sectors, from government-funded organisations to listed and unlisted property funds, from charitable organisations to listed property developers with multinational operations. Our single management structure across Hong Kong and China, combined with industry focus, allows effi cient and rapid allocation of resources wherever our clients are located in China. Real Estate At KPMG, we are committed to providing quality services to our clients. To help meet our clients’ needs, KPMG China has drawn on all of our key services areas and has formed the Real Estate Group within our Infrastructure, Government, and Healthcare (IGH) Line of Business. This multi-disciplinary group, with its industry knowledge, focus, and experience, provides audit, tax, due diligence, and other quality business advisory services to our clients in the Real Estate sector. Global Real Estate KPMG’s Global Real Estate practice is a network of experienced professionals based in member fi rms around the world and combines in-depth knowledge with understanding in how to effi ciently transact investment or development business at a national level with the international skill set that today’s global investor demands. Restructuring Our restructuring professionals work alongside lenders, stakeholders and all levels of management to develop restructuring strategies that can provide real improvements to a company’s balance sheet, profi t & loss and cash fl ow. Financial restructuring provides background support to the executive team and assists businesses in renegotiating their fi nances, providing a robust challenge to the business plan that underpins their refi nancing proposals. KPMG China helps companies with operations in Greater China and across the Asia Pacifi c region revive their businesses but we are also appointed as liquidators or administrators when other options are not viable. © 2009 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. 7 China Real Estate Briefi ng Contact us Andrew Weir Partner in charge Real Estate China Tel: +852 2826 7243 andrew.weir@kpmg.com.hk Benny Liu Partner Real Estate Guangzhou Tel: +86 (20) 3813 8118 benny.liu@kpmg.com.hk Chris Abbiss Partner Tax Hong Kong Tel: +852 2826 7226 chris.abbiss@kpmg.com.hk Nelson Lai Partner Real Estate Shanghai Tel: +86 (21) 2212 2701 nelson.lai@kpmg.com.cn Stephen Ip Partner Real Estate Shanghai Tel: +86 (21) 2212 3550 stephen.ip@kpmg.com.cn Simon Ho Partner Real Estate Beijing Tel: +86 (10) 8508 7021 simon.ho@kpmg.com.cn Jennifer Wong Partner Tax Hong Kong Tel: +852 2978 8288 jennifer.wong@kpmg.com.hk John Gu Partner PRC Tax Hong Kong Tel: +852 2978 8983 john.gu@kpmg.com.hk Eddie Middleton Partner Restructuring Services Hong Kong Tel: +852 3121 9833 edward.middleton@kpmg.com.hk © 2009 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. www.kpmg.com.cn www.kpmg.com.hk The information contained herein is of a general nature and is not intended to address the © 2009 KPMG, a Hong Kong partnership circumstances of any particular individual or entity. Although we endeavour to provide accurate and a member fi rm of the KPMG network and timely information, there can be no guarantee that such information is accurate as of the date of independent member fi rms affi liated with it is received or that it will continue to be accurate in the future. No one should act upon such KPMG International, a Swiss cooperative. All information without appropriate professional advice after a thorough examination of the particular rights reserved. Printed in Hong Kong. situation. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.