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Soho China's CEO Zhang warns of bubble in second-tier cities

(China Daily)
Updated: 2010-01-04 08:06

Soho China's CEO Zhang Xin recently warned of a serious property bubble in China's real estate market, which put her at odds with other Chinese property bosses who say the high prices are justified by fundamental demand.

Zhang said in an interview with Reuters that China was already facing a serious property bubble, especially in second-tier cities, and the government must tighten bank lending to prevent it from swelling to dangerous proportions.

"The government needs to realize how serious the asset bubble is," Zhang said. "It cannot control the asset bubble by just saying a few words. The most fundamental solution is to tighten credit."

Property prices should only go up because people want to actually use the space but some major Chinese cities had even higher vacancy rates than London or New York in office and retail space, she added.

While China is laying out measures including land-use policies and taxation to curb speculative investment in the real estate market, it is widely expected that the government's monetary policy is going to remain loose in 2010 so that it is possible that property prices would continue to rise.

Zhang said her company would step up efforts to sell more in 2010 under such conditions and currently her company had space worth more than 50 billion yuan ($7.32 billion)available for sale.

Soho China, a real-estate company co-founded by Zhang and her husband Pan Shiyi, has made a huge amount of profit from the development concept "small office/home office" in Beijing's Central Business District.

The company achieved a contracted sales income of 13 billion yuan in 2009 and has completed the development of about 1.5 million sq m of space in the district.

Their first project, Soho New Town, went on the market in 1998 and construction was completed in 2001. In 2007, Soho China went public on the Hong Kong Stock Exchange, sucessfully raising $1.66 billion in the initial public offering.

Zhang was also listed by the Forbes Magazine as one of the world's most powerful women with a net worth of $2.3 billion as of November 2009.

She said Soho China felt little urgency to acquire more land or property, having paid a combined 8.8 billion yuan in the second half of 2009 to buy a land lot and an office building in Beijing and another office complex in Shanghai.