Soho China stays the course with focus on Beijing
Chairman expects strong growth in city's market in next 20 years
Beijing property developer Soho China says it will keep its development focus on the capital in anticipation of strong growth in the city's property market over the next 20 years.
Other first-tier cities will still be outside the company's considerations, chairman Pan Shiyi says.
'It is not possible for a Beijing-based developer to make the same level of profit after going out of the city,' Mr Pan said in an interview with the South China Morning Post.
'Beijing is still a growing city and many people are rushing into it. We won't change our strategy [focus on the Beijing market],' Mr Pan said.
'The property market [in Beijing] should continue to be hot, as the economy in China is still recording double-digit growth,' he said, adding that Beijing and Shanghai were the economic growth engines and so were their property prices.
Rumours have circulated in the market that Soho China may explore other cities such as Shanghai and Guangzhou.
However, Mr Pan said many property developers' profits declined once they transformed into nationwide players.
Soho China, which is renowned for its branding, has changed its business direction since 2005 with a focus on developing office-retail projects and reducing its involvement in the residential market.
'Competition in the residential market is getting fierce and more players are in the market. The market is also negatively affected by the government policy to control property prices,' Mr Pan said.
The company has developed 250,000 square metres of office and retail spaces in various projects in Beijing's central business district, such as Jianwai Soho, Soho Shan Du and Chaowai Soho.
More than 90 per cent of Soho China's projects are commercial developments and its strategy is to sell them for quick profits. It prices its projects from 20,000 yuan to 30,000 yuan per square metre.
'We are happy to sell our office and shop projects rather than keep them for investment. We can sell them at a much higher premium to the return from rental income,' Mr Pan said.
Last weekend, the company booked revenue of 193 million yuan by selling all 22 retail shops in the Chaowai Soho shopping centre.
It has been reported that the company will launch its initial public offering in Hong Kong in the first half of this year, seeking to raise HK$4 billion.
Goldman Sachs and HSBC are said to be the deal sponsors. Mr Pan declined to comment.
Commenting on China's austerity measures to curb rising property prices, Mr Pan said the government was trying to cool the property market but the policy was not on the right track.
He also criticised the government's refusal to discuss any new policy with the industry before introducing it.
'In the past two years, the government has been in a hurry to cool the property market, as prices were rising very fast,' Mr Pan said.
'However, some policies such as reducing land supply and restricting capital flows into the property sector were totally contrary to China's reforms.'
He said the government should consult the industry before any new measures were launched as this would aid the implementation of such policies.
He suggested that the government should help expand the secondary market so as to rationalise demand for housing.
'Prices are getting higher but the increase is limited to new flats, so those in the low-income group cannot afford to buy them. The government should help to establish a second-hand market by allowing old flats to be sold to the low-income group and creating sufficient supply. This could help cool the market,' Mr Pan said.