Savills sees profit in China despite property curbs

Savills Plc, a UK-based real estate adviser, expects revenue growth of 10 to 20 percent in China this year, despite real estate curbs and an economic slowdown, said Jeremy Helsby, group chief executive.

Last year, Savills' group revenue was up 7 percent, compared with 20 percent growth in China, according to the company's financial statements.

"Our business growth in China reached a record high last year, with the property management services contributing almost half of the revenue," said Helsby

The company mainly runs four lines of businesses in China: property management, valuation, consultancy and agency.

"As most of our business is involved in the commercial real estate and high-end residential sectors, the ongoing correction in China's residential sector almost has no impact on our business.

"I believe such a correction is a healthy one for the market," said Helsby.

He also said China's economic growth slowdown wasn't likely to affect Savills' business growth this year.

"Compared with other major economies, especially developed ones, China's economic growth has been extraordinary," said Helsby.

China's economy expanded 8.1 percent in the first quarter, the slowest pace in almost three years and the fifth straight quarterly deceleration.

The World Bank lowered its forecast for China's economic growth rate in 2012 in its latest quarterly report, saying GDP growth may dip to a 13-year low. It cut its forecast to 8.2 percent from the 8.4 percent estimate issued in January.

"We will continue to open new branches and add staff this year, betting on the rosy prospects of China's real estate sector in the long run," said Helsby.

The company plans to open a new branch this year, probably in Qingdao, Shandong province.

When talking about investment opportunities in the global real estate market, Helsby said the UK is the primary choice.

"It is a fantastic time to invest in the UK right now, both in the residential and commercial sector, and a number of institutional investors from China have been actively seeking such opportunities," said Helsby.

In 2009, the owners of Canary Wharf, Songbird Estates, announced that China Investment Corp, the sovereign wealth fund, had formed a consortium with Qatar Holding, the Qatari sovereign wealth fund, and a number of existing investors, to provide more than $1.3 billion in new equity.

Qatar became the largest shareholder in the group with a stake of less than 30 percent. Private US investor Simon Glick took 27 percent and CIC took about 19 percent, the Financial Times reported at that time.

Helsby said it seems that CIC would prefer a stakeholding rather than buying a property directly, considering the difficulties in the operational management after the purchase.

"Cities on the shopping list for international investors, including those from China, include London, Paris, Frankfurt and New York," he said. "I am also bullish on the US real estate market and believe there will be attractive investment opportunities in the coming 12 to 24 months."

According to Helsby, there are two institutional investors from China that have contacted Savills about property investment opportunities along the US east coast.

Wei Kefei, director of Four-Season Real Estate Expo Co Ltd, said more Chinese enterprises and wealthy individuals are going to the US to buy land this year.

"In the coming five years, I believe there will be more Chinese property developers expanding overseas," he added.

For institutional investors eyeing opportunities in China's real estate sector, Helsby said capital from the Asia-Pacific region, especially from Singapore, would be more active.

Statistics from E-Commercial China show that investment from Singapore accounted for more than 35 percent of all overseas investment in China's real estate sector last year.

"We believe this figure may climb further this year," said Tsui Yik, director of Valuation and Investment Services at E-Commercial China.