Banking & Finance

Property appreciation

Internet IPO rockets on debut

For those old enough to remember the dotcom boom, last week’s IPO of real estate website operator, SouFun, should bring back happy memories.

SouFun managed to price its shares in New York at the top end of the indicative range, raising $125 million. And its stock price was up 73% by the close of the first day of trading. A great result for both the company and its new shareholders.

Investors were no doubt sold on SouFun’s positive outlook. The company’s name gets straight to the point in terms of its business focus ­– it translates as “searching house” – and SouFun is widely known in the Chinese market. It offers sales information across the domestic property sector: anything from luxury apartments going for Rmb100,000 ($14,000) a square meter in Beijing to no frills space in Guangdong renting out for Rmb300 a month, reports FinanceAsia. Property market forecasts and feng shui predictions are also on offer.

How about some of the less postive news flow surrounding the Chinese property market at the moment? It looked like something of a challenge to get the offering fully sold in light of coverage of government efforts to cool real estate prices. But the brokers seem to have managed it, probably helped by data for August that seemed to show prices holding solid (and even back on an upward trend in some places).

But the day after Soufun’s NYSE listing, China Business reported that a property tax was “imminent” in a number of cities. Many analysts think that a tax would be far more likely to lead to a drop in prices. That would take some of the steam out of the market, and may dampen property developers’ enthusiasm for advertising on websites like SouFun.

A more positive take from SouFun itself: that it is primarily an information provider and that investors will need access to reliable data when the market is going down, as well as up. The logic seems to be that panicky house buyers would keep logging on during a market downturn, and that would keep the advertisers coming back too.

A premise that few will want to see tested…


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