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Making use of the many opportunities in Nanchang
PLAYING golf is a must for Joe Goh on weekends. It gives him stamina, says the chairman and CEO of investment holdings firm Internet Technology Group International Private Ltd (ITG). This stamina is to sustain Mr Goh's weekly shuttle between China and Singapore - an exacting work routine for the past three years and counting.
Every Monday, he leaves for the airport before sunrise to embark on an 11-hour journey to the south-eastern Chinese city of Nanchang, where he is currently overseeing a mixed-use property development.
"When I'm back on weekends, I must exercise to recharge; if not, I'll burn out," says Mr Goh. "When you start a business, you have to see it to completion no matter how tough it gets."
Known as Singapore International, the development in Nanchang is ITG's main project at the moment, helmed by the firm's subsidiary developer Jiangxi Singapore Property Development.
The site spans a gross floor area of five million square feet with 3,700 and 300 residential and commercial units respectively.
Slated for completion in June next year, more than 3,200 units have already been sold for 4.5 billion yuan (S$889 million). To date, the project has raked in a net profit of 1.7 billion yuan - a figure that Mr Goh considers "very successful".
These results more than make up for the unsparing demands of his job, says Mr Goh.
"Our performance motivates me to continue travelling back and forth every week."
Location and profit margin are key factors of consideration for property development in China, and the second-tier city of Nanchang offers both, points out Mr Goh.
Being less developed than its first-tier counterparts, Nanchang holds more opportunities for smaller foreign companies. Land is relatively cheaper and competition among developers is not as stiff, he adds.
"Unless you have very deep pockets, you can't compete with the big developers in first-tier cities like Beijing and Shanghai because their turnover is so high. You will just get swallowed."
The resilient housing demand in Chinese cities drives higher profits, Mr Goh notes.
According to data from the People's Bank of China, Chinese banks extended 1.9 trillion yuan in new property loans in the first quarter of 2018 - up 11.8 per cent year on year - suggesting a general increase in home purchases.
This comes on the back of the Chinese government's ongoing plans to move two million people from remote villages to cities to narrow the income inequality gap.
To date, almost 59 per cent of China's population are already living in urban areas.
Further urbanisation is key in the government's plans and Nanchang has been faring well.
A recent report by research firm Brookings Institution revealed that Nanchang is ranked 19th out of 50 metropolitan areas worldwide with the fastest-growing economies, chalking up a GDP growth of 8.4 per cent between 2014 and 2016.
"When people in Nanchang start earning more, they are able to buy our residential units," says Mr Goh. "When you have more people moving in, our commercial units will naturally start to sell well also."
SOFTWARE IS KEY
To stay ahead of competition in Nanchang, Mr Goh believes in providing quality software and amenities.
The development offers Wi-Fi access, a swimming pool and potable water supplied directly to households. Residential units are also equipped with keyless smart doors that require facial and thumbprint recognition.
Such added features justify the current sale price of 13,000 yuan per square metre - around 30 per cent higher than the average selling price in the area, says Mr Goh.
"These things are not common among Chinese developments. We want to do more than other developers, who tend to spend on building only. We want to be a total package because we know that if we do it right, people will be willing to pay."
The firm launched its residential units for sale over four phases, raising the price from 6,000 to 13,000 yuan with each successive launch - a strategy that paid off, according to Mr Goh.
"It gives early buyers assurance that they made the right choice when they see prices increasing. They're also more likely to recommend to friends."
COOLING MEASURES IN CHINA
With cooling measures in place, Mr Goh notes that it will be increasingly challenging to conduct business in China's real estate scene.
Since 2016, Chinese authorities have been introducing various measures to rein in prices, including restricting multiple home purchases and raising the bar for mortgage lending.
"These new restrictions are coming like a storm. We have a strong cash flow so we can still manage now but it's hard to predict the future," says Mr Goh. "The market is becoming very saturated and you need very deep pockets."
ITG is exploring new investment opportunities in the education, healthcare and environment sectors. "We see a big demand in these areas. China has a lot of opportunities, we shouldn't just restrict ourselves to property development."
The firm is in talks with several companies in Singapore to develop hydrogen cars for China. Mr Goh notes that such technology is still relatively new in China, compared to electric cars that run on battery-powered motors.
"It will also be good to go into a business that allows us to play a part in sustainability."
The firm also hopes to tap on Singapore's reputable education system to bring local education centres into China in the future.
But these ideas are still at the infancy stage, according to Mr Goh, whose main focus remains the property development in Nanchang.
He explains that maintaining a strong cash flow is key to building a sustainable business, which is why the firm does not dabble in too many projects at once.
"We're a bit slow, but it doesn't matter. Companies need to grow conservatively. If you grow rapidly without positive cash flow, it can be very dangerous," Mr Goh adds.