High price for Shanghai land parcel is worth it as city is key to long term growth plans, says Future Land’s Ouyang Jie
Developer looks to having annual sales of about 10 billion yuan in Shanghai.
Ouyang Jie, 55, was a teacher at the Lanzhou University of Technology between 1983 and 1992 before becoming an official in Changzhou, Jiangsu province. During his tenure as a government official, Ouyang led a task force that was instrumental in streamlining the approval procedures at Wuding district. Ouyang moved to Future Land Holdings in 2007 and was appointed senior vice president for branding and marketing. Apart from being an expert on the mainland property market, he also has a sharp focus on industry statistics.
Why did Future Land pay 67,409 yuan (HK$78,785) per square metre of gross floor area for a land parcel in Shanghai?
Land prices around Shanghai’s Middle Ring Road is very expensive due to the scarcity of land. The plot in question at Liangcheng was also the first piece of land auctioned in Hongkou district since the beginning of 2015. More importantly, the site is surrounded by abundant education and commercial resources such as schools and shopping malls. We believe this parcel of land is worth the price that we have paid. Our ultimate goal is to achieve annual sales of about 10 billion yuan in Shanghai.
Could you elaborate your plans for the Liangcheng project? Do you plan to build high-end residential properties to tap wealthy clients?
Yes, that’s true. We hope to create high-end properties with Future Land’s own signature. Going forward, Future Land will have a series of high-end projects under the Pu Yue brand. Besides, we don’t rule out the possibility of introducing other partners to jointly develop the land in Liangcheng for diversifying risks and sharing returns.
There have been mounting worries about the bursting of the property bubble in major cities like Shanghai. What’s your take on it?
When you talk about a property bubble, it means that the chances of a sharp fall in home prices are also rising. However, the current high prices are more a result of short supply. High prices have also been driven factors such as the ever-increasing money supply that leads to higher appetite for property assets. Though there are risks in cities like Beijing and Shanghai, it doesn’t necessarily mean that the bubble will burst anytime soon.
What is your outlook for the residential market in Shanghai?
It is difficult for the residential market to maintain a rapid growth in prices during the second half of the year as the segment has already seen a steep rise during the first six months. However, prices are unlikely to fall due to the balance between the supply and demand. I expect a stable growth in home prices.
What is Future Land’s long-term goal now that mainland developers are accelerating diversification plans?
Future Land will closely monitor the real estate market trends to fine-tune its commercial realty business and upgrade its residential market activities. We will also use information technology to improve business efficiency. We have set a sales target of 52 billion yuan for this year and we will also seek a listing in the mainland stock market. We are looking at having sales of about 100 billion yuan by 2020.
How does Future Land plan to raise funds for its upcoming projects?
We still have a good business relationship with major commercial banks and can obtain bank loans. Future Land will also raise 3.8 billion yuan through a private offering by selling additional A shares. We have already got the CSRC approval for the same. Besides, we will also raise funds by issuing bonds and opening REITs. We have also set up a 10 billion yuan fund with some partners for property-related investments.
The “Land King” phenomenon is seen as a potential threat to the long-term growth of the mainland property market. What are your suggestions to curb the soaring land prices?
Indeed, the surging land prices have been the major driving force for high home prices. It is advisable for the authorities to increase fresh land supply and adopt a market-based land supply system to rein in the soaring land prices.
Will commercial realty continue to be a core area for Future Land?
Yes. Commercial and residential properties will continue to be the two growth engines for the further growth of Future Land. Shanghai will be our hub and our geographic focus will be the Yangtze River Delta.