Worst Over for China Commercial Real Estate: SOHO CEO

The worst is over for China’s commercial real estate industry and the government’s policy to provide more credit for private firms should help the sector, Zhang Xin, Chief Executive Officer of SOHO China, the largest property developer in Beijing said.

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“Definitely, we have seen the worst,” Zhang told CNBC’s Christine Tan on “Managing Asia”. “I think in commercial real estate, January was the worst. By now, it’s definitely turned around much better now.”

Zhang says she expects demand to increase and that her firm has been buying projects from developers who are cash-strapped.

Beijing introduced a range of measures two years ago to curb the red-hot property sector. The Chinese government also tightened credit in 2011 by raising reserve requirement ratios for banks six times to curb over-investment.

According to Zhang, the Chinese government is now clearly reversing this policy. “In terms of six months ago to now, the credit is far more,” Zhang said.

Despite concerns about oversupply in commercial real estate in China, property consultancy Knight Frank says office rents in Shanghai and Beijing increased 12 and 46 percent respectively last year. Both cities have also witnessed consecutive decreases in office vacancy rents in the past four years.

However, Zhang said the residential market will remain under pressure as the government is determined to keep homes affordable.

“In terms of the residential real estate market, the government is very determined not to let any relaxation happen this year.”

The government’s property tightening measures appear to be working, with home prices declining for six consecutive months since October 2011, according to Reuters calculations using data published by the National Bureau of Statistics. Average new home prices across the country fell 0.3 percent in March from February, marking the sixth consecutive month-on-month decline, according to the Bureau.

Despite the decline in home prices, Chinese Premier Wen Jiabao reiterated in mid-April that the government will maintain property curbs while ensuring that the Chinese economy has enough investment to support growth.