Chinese RE Developer – “Prices are too high, Rent is too low. For us it makes no sense to hold property, so our strategy is to sell everything.”

Different market, same dynamic, correct conclusion. Fundamentals do matter. -vreaa

A discussion of Chinese RE at seekingalpha.com 30 Jan 2010 quotes Zhang Xin, the CEO of SOHO China, one of the best-known women in Chinese business, and one of the country’s leading property developers –

“We don’t really have a view on when it will end; [but] we do have a view that this is a bubble. Basically . . . our strategy is to sell everything we have. The real estate business should really be looking at rental yield; build a building and then lease it out with the rent giving a decent return. But, because of where China is with asset bubbles, people want to buy the assets regardless of whether they can be leased out or not. People just want to hold [property], even if it is empty. Now, if you look at the prices for the property being sold versus the rent you collect there is a real disconnect. Prices are too high, rent is too low, so if you hold property in order to get yield you are likely to get very little. For us it makes no sense to hold property, so our strategy is to sell everything. We see ourselves very much as a manufacturer. We buy land, we build, and then we sell. And the asset bubble has compelled us to be even more of a manufacturer . . . the strategy is to keep a lot of cash, to sell as fast as possible, and to turn around assets faster — even faster than before.”