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China's Richest Man Thinks London Property Is Cheap

Bonjour Kwon 2013. 10. 19. 05:22

 

18 10월, 20:31www.forbes.com

Wang Jianlin of Dalian Wanda group, who was minted as China’s richest man in the annual Forbes China Rich List this week, has been busy expanding his empire outside of China, to movie theaters in the U.S. and luxury yachts in U.K. In his core real estate business, he announced his first overseas hotel venture in June - it would a 62-storey luxury hotel and apartment building in Vauxhall on London’s South Bank.

 

 These are more than mere vanities. London property prices might make the city one of the most expensive in the world, but Wang thinks his new purchase was a great bargain.

 

 Wang was speaking in relative terms comparing it to that in China, and revealed his calculation in a recent interview with China’s Time Weekly, published on the publication’s website.  Here’s his arithmetic.

 

 The 700 million pounds price tag attached to the construction of a 160-room Wanda Hotel is earmarked for the total investment. The actual purchase price for the land was 90 million pounds for a total area of 103,000 square meters (about 1.1 million square feet), which he declared was “a big bargain” when valuing the land by per square meter of floor area. The price, he said, was “equivalent to building a flat worth 10,000 yuan in China with land price per square meter of only 700 yuan,” – a bargain “unimaginable in China.”

 

 In fact, the average Beijing land price could be as much as ten times that. In September a residential land parcel went for a record 73,000 yuan per square meter.

 

 Moreover, not all the land will be used for building the hotel. Lin said he would reserve 63,000 square meters for the construction of flats. Using a sale price of about 14,000 pounds per square meter as a yardstick, lower than the current market quote of about 15,000 pounds per square meter for flats the neighborhood, he estimated that he would be able to recoup the total investment of 700 million pounds, net of 200 million pounds in taxation, within three to four years of finishing construction. “We will get the hotel virtually for nothing, a return that would not be easy to realize even in Beijing and Shanghai,” he enthused.

 

 Obviously, he is betting that London property prices continue to rise, or at least hold up. He is not the only one making this assumption. Chinese developers and their wealthiest clients have been snapping up real estate all across London, pushing prices to blistering levels. Investors have grown so confident that they are beginning to look north to Scotland. IP Global, a real estate consultancy, said the trend has resulted in property prices in Aberdeen, more than doubling in the past ten years, while Edinburgh has also witnessed robust interest in student property investment.

 

 It’s part of the great deluge of Chinese offshore real estate investment, much of it landing on the U.K., Australia, France, Singapore and America. A recent entrant is China’s State Administration of Foreign Exchange (SAFE), manager of the country’s $3.66 trillion foreign reserves, the world’s largest, who was just reported by Bloomberg to be setting its sights on real estate and infrastructure projects across western and central Europe.

 

 It will be some time before we know whether these are successful. but we’ll know how good Wang’s arithmetic is by the time the Wanda Hotel is finished.

 

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