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rESEARCH 研究报告 gREATER cHINA Property market report 大中华物业市场报告 PRIME OFFICE 甲级写字楼 Luxury residential 豪宅 PRIME RETAIL 优质商铺 Q4

2012 二零一二年第四季 Greater china Q4

2012 Quarterly

2 During the fourth quarter of 2012, luxury residential markets in major Mainland cities performed well, with both prices and rents rising steadily.

Sales volumes in Beijing and Shanghai dropped from the heady highs of previous quarters, while developers in Shanghai and Guangzhou were active in launching new luxury homes, hoping to meet annual sales target. Beijing The Five-Year Land Supply Plan indicated that there would be no residential land supply within the city'

s third ring road until 2015. The scarcity of luxury residential projects secures their potential for appreciation. Although luxury sales dropped from the high levels of previous quarters, 1,600 homes were sold in the fourth quarter, a relatively high level for the past three years. Prices maintained a steady growth of 2.1%, quarter on quarter, to reach RMB41,804 per sq m. The luxury vacancy rate dropped a further 0.3 percentage point to 11.6%― the lowest level of the last three years. Meanwhile, monthly rents rose steadily by 2.5% to RMB158.6 per sq m. Serviced apartments'

vacancy rate continued to fall with higher rents, while the vacancy rate of luxury apartments and villas increased marginally with slightly lower rents. Following robust sales in the third quarter, luxury supply dropped over 50% in the fourth quarter, owing to fewer property launches. Nevertheless, luxury home sales area rose 49% during

2012 with strong demand from end-users, upgraders and buyers who bought real estate to fight inflation. Sales are expected to fall in the first quarter of 2013, as Chinese New Year is traditionally a slow season. However, due to the overall market recovery during 2012, home prices could continue to grow moderately with steady investment returns. Shanghai Shanghai'

s luxury residential market witnessed strong recovery towards end- 2012, with monthly sales rebounding to about 40,000 sq m, driven by sales in Xuhui District and Little Lujiazui. However, sales in the fourth quarter dropped for the second consecutive quarter, down 5.4% from the third quarter to 114,000 sq m, or down 12.3% from the second quarter, the sales peak of the year. Luxury prices also grew for two consecutive quarters, averaging RMB55,712 per sq m, up 10.3% quarter on quarter. With an average price of RMB144,318 per sq m, COFCO Ocean One in Lujiazui was one of the highest priced projects in Shanghai in 2012. Growth in luxury monthly rents slowed to 0.2%, quarter on quarter, to RMB175.5 per sq m. The occupancy rate rose 1.8 percentage points to 95.7%. Homes rented for less than RMB20,000 a month enjoyed strong demand and robust activity. In the fourth quarter, new luxury supply reached about 140,000 sq m, up over 100% quarter on quarter. Tishman Speyer launched

217 apartments in The Springs in Jiang Wan New Town at RMB44,000 per sq m on average. Mainland luxury residential prices and rents further up with strong demand Luxury sales are expected to decline in the first quarter of 2013, affected by the Chinese New Year holiday. Luxury homes in prime areas launched in the second half of

2012 were well favoured by buyers. In 2013, luxury prices would maintain moderate growth, due to sustained demand in prime areas. Guangzhou Since the second half of 2012, Guangzhou'

s luxury property market has experienced a marked upturn in both sales volume and prices. During the fourth quarter, sales volume remained steady for luxury homes worth above RMB30,000 per sq m. In October 2012,

271 such homes were sold― up 19.4% quarter on quarter. Luxury residential prices averaged RMB34,011 per sq m, up 9.4% quarter on quarter, the biggest rise since 2011. Thanks to demand for residential leases from international companies, the average luxury residential monthly rent grew a further 0.5% from the previous quarter to RMB123.2 per sq m, the highest level of the past three years. During 2012, developers were active in launching new homes, pushing up supply levels. Luxury supply in the fourth quarter grew 53.3% quarter on quarter, with major projects including Forest Hills in Tianhe District developed by Sun Hung Kai Properties (0016.HK) and The Bayview in Pearl River New Town developed by Kingold Group. The prices of the latter reached as high as RMB100,000 per sq m. The two provided about 200,000 sq m of residential space to the stock. In light of the solid rebound during the second half of 2012, the market is set to recover further in 2013, with luxury prices rising 3% in the first quarter and about 10% over the year. Luxury sales are expected to decline in the first quarter of 2013, affected by the Chinese New Year holiday. KnightFrank.com.cn Table

1 Economic indicators Latest reading Beijing Shanghai Guangzhou Hong Kong GDP growth

2012 +7.7% +7.5% +9.2% (1-3Q) +1.0% (1-3Q) Total GDP contribution to the country

2012 3.4% 3.9% 2.8% (1-3Q) n/a Inflation rate

2012 +3.3% +2.8% +3.7% (Nov) +3.7% (Dec) Unemployment rate

2011 1.4% 4.2% 2.6% 3.3%# (Oct-Dec 2012) FDI in real estate (USD) n/a $70M (2012) $0.7B (2011) $1.1B (2010) $726.0B (2010) Year-on-year growth in (utilised) FDI

2012 +14.0% +20.5% +7.7% (Jan-Nov) +16.8% (1Q) Year-on-year growth in retail sales

2012 +11.6% +9.0% +15.0% (Jan-Nov) +9.9% (Jan-Nov) Prime lending rate Dec

2012 6.15%^ 6.15%^ 6.15%^ 5.00%* Source: CEIC / National Bureau of Statistics of PRC / Census &

Statistics Department of HKSAR ^ People'

s Bank of China # Provisional * HSBC prime lending rate Table

2 Major real estate market policies Policy Policy details Effective date Cities applicable The Beijing government clarified the ineligibility of non-residents to buy homes. Non-resident families achieving a continuous social insurance record of five years by making deferred payment will not be recognised in homebuyer eligibility review. Dec

2012 Beijing Hangzhou'

s Land and Resources Bureau changed the land- bidding method. When the premium reaches 49%, the land will go to developers who construct the most affordable and resettlement housing. This applies to all land subsequently granted in major urban areas of Hangzhou. Oct

2012 Hangzhou Nansha in Guangzhou will develop two major central business districts. Nansha will develop two major central business districts with a total area of 230,000 sq m in Aoyuan Hai Jing Cheng and Huahui International Plaza. Oct

2012 Nansha Hong Kong introduced Buyer'

s Stamp Duty (BSD) and enhanced and extended existing Special Stamp Duty (SSD). All non-permanent residents and companies shall pay a 15% BSD for buying homes in Hong Kong. The rate of SSD was raised and its execution term was extended to three years. Oct

2012 Hong Kong China'

s GDP growth reached 7.8% in 2012, a slide from 9.3% in 2011. Economic indicator and real estate policies In October, the Hong Kong government introduced a 15% Buyer'

s Stamp Duty for all non-permanent residents and companies buying residential properties in Hong Kong, and raised the rate of the Special Stamp Duty, extending its term of execution to three years. Figure

1 Real GDP growth in China Source: National Bureau ofStatistics / Economist Intelligence Unit Figure

2 Required reserve ratio for large banks Source: People'

s Bank of China

3 Greater china Q4

2012 Quarterly Figure

3 Grade-A office price index Q1

2003 =

100 Figure

4 Grade-A office rental index Q1

2003 =

100 Table

3 Average prices, rents, vacancy rates and yields [1][2] City Price (US$ psm) Rental (US$ psm per month) Vacancy rate Yield Beijing $6,205 $63.4 3.8% 7.6% Guangzhou $5,182 $28.6 21.0% 5.2% Shanghai $7,929 $44.4 5.1% 6.1% Hong Kong $26,771 $66.5 3.7% 3.0% [1] Average prices and rents are derived from different baskets of buildings, hence the two should not be used to estimate average yields. [2] Prices and rents are calculated on gross floor areas. Table

4 Supply and demand indicators City Indicators Comments Beijing Only one new Grade-A office building, the 38,000-sq-ft Fortune Resource International Center, was launched in the fourth quarter. Grade-A office vacancy rate rose 0.6 percentage point to 3.8% in the quarter. The average rent edged up 0.4%. Grade-A office supply in

2012 was low at 238,274 sq m. Supply continuously dropped in the past five years. Supply could start to rise from 2013, but the amount will remain limited. Vacancy rate remained low due to limited supply. Rents remained at high levels. Guangzhou Grade-A office supply in Guangzhou dropped 20% quarter on quarter. Sales of Grade-A offices decreased 60% from the previous quarter. There were literarlly no new supply of Grade-A offices for sales in the quarter. Grade-A office sales declined due to rebound in home sales and high office prices. Shanghai Only one Grade-A office building, namely Verdant Place, was completed in the quarter. The renovated building provided 25,350 sq m of space, pushing the total Grade-A office stock to 5.46 million sq m. The average vacancy rate remained at 5.1%, but rents started to trend downward. The launch of a number of Grade-A office buildings was delayed to 2013. Enterprises, particularly MNCs, were cautious in expansion. The market started to shift from a landlord'

s market to a tenant'

s market. Hong Kong Amid new tightening measures in the residential market, some investors shifted to other property sectors, helping stoke activity in the office sales market. We expect Central office rents to drop at most 5% in 2013, a smaller magnitude compared with 2012. Rental gap between core and non-core areas will continue to shrink. Peak Trough PRIME OFFICE Prime office rental cycle Beijing Guangzhou Shanghai Hong Kong

4 KnightFrank.com.cn Table

5 Major sales transactions City District Development Floor / Unit Area (sq m) Price (US$ million) Price (US$ per sq m) Beijing Chaoyang Wangjing SOHO n/a

300 $2.6 $8,661 Beijing Chaoyang Fenglian Building n/a 7,015 $27.4 $3,908 Guangzhou Tianhe One Bravo High floor unit 5,715 $38.7 $6,780 Guangzhou Tianhe R&

F Yingkai Plaza High floor unit

460 $3.5 $7,656 Shanghai Xuhui Magnolia Plaza 23rd-24th floors 3,001 $32.1 $10,695 Shanghai Huangpu A........