China developers struggle as govt tightens property market
10 May 2011
Property developers from China are facing stagnant sales and increased losses in the midst of Beijing’s efforts to cool the hot real estate market.
“The recent government control over its property market has restrained half of the demand. Small property developers will first feel the pinch,” noted Zhang Dawei, a property analyst from Beijing-based Centaline Property.
Out of 113 listed property developers that had filed their Q1 reports, 25 reported losses, while 42 registered decrease in profits. Most of these were small and medium-sized property developers. Even the country’s leading developers, such as China Vanke, Poly Real Estate Group Co. and the Gemdale Corp., experienced a declined during the period.
Overall, Chinese property developers’ debt jumped 41.27 percent year-on-year to 1.05 trillion yuan (US$161.53 million) for the year ending March, according to Wind Information, a Shanghai financial data provider.
By the end of March, the value of the 113 developers’ unsold houses surged 40.21 percent year-on-year to 903.5 billion yuan (US$139.1 billion), while profits dropped 4.86 percent to 54.65 billion yuan (US$8.41 billion).
April data was also discouraging. China Vanke, China’s largest property developer by market value, registered a moderate sales increase in April, which rose 1.3 percent year-on-year to 7.9 billion yuan (US$ 1.22 billion), compared to 9.33 billion yuan (US$1.44) in March.
“The government control has an evident effect on the property market as transactions slow. As property supply increases in the future, the sector’s inventory will also rise, adding to the sales pressure,” said Tan Huajie, China Vanke’s Board Secretary.
Most property developers had taken a wait-and-see attitude toward the property market and delayed sales of recently-developed apartments in Q1.
“In order to have more cash on hand, property developers may adjust their prices and adopt fast sales strategies to launch more new property projects in the coming months,” said Yang Guohua, a property analyst with Shanghai-based Orient Securities.
Since last year, the Chinese government has repeatedly emphasised its policies to curb the real estate market and imposed several cooling measures including a trial property tax, increasing down payments, implementing tighter monetary policies, banning third-home acquisitions and setting price control targets.
In its latest effort to curb property prices, the National Development and Reform Commission, the country’s leading economic planner, has ordered that from 1 May, property developers must sell residential properties at marked prices.
However, despite the implementation of these measures, prices remain high. Home prices in 100 major cities across the country climbed 0.4 percent from March to April, with 77 cities witnessing month-on-month increases, according to a report by China Real Estate Index System (CREIS).
“The persistent fever might force government to implement tougher control policies later this year as ongoing measures are mostly meant to regulate the new-homes market,” Mr. Zhang said.
3 comments:
China developers struggle as govt tightens property market
10 May 2011
Property developers from China are facing stagnant sales and increased losses in the midst of Beijing’s efforts to cool the hot real estate market.
“The recent government control over its property market has restrained half of the demand. Small property developers will first feel the pinch,” noted Zhang Dawei, a property analyst from Beijing-based Centaline Property.
Out of 113 listed property developers that had filed their Q1 reports, 25 reported losses, while 42 registered decrease in profits. Most of these were small and medium-sized property developers. Even the country’s leading developers, such as China Vanke, Poly Real Estate Group Co. and the Gemdale Corp., experienced a declined during the period.
Overall, Chinese property developers’ debt jumped 41.27 percent year-on-year to 1.05 trillion yuan (US$161.53 million) for the year ending March, according to Wind Information, a Shanghai financial data provider.
By the end of March, the value of the 113 developers’ unsold houses surged 40.21 percent year-on-year to 903.5 billion yuan (US$139.1 billion), while profits dropped 4.86 percent to 54.65 billion yuan (US$8.41 billion).
April data was also discouraging. China Vanke, China’s largest property developer by market value, registered a moderate sales increase in April, which rose 1.3 percent year-on-year to 7.9 billion yuan (US$ 1.22 billion), compared to 9.33 billion yuan (US$1.44) in March.
“The government control has an evident effect on the property market as transactions slow. As property supply increases in the future, the sector’s inventory will also rise, adding to the sales pressure,” said Tan Huajie, China Vanke’s Board Secretary.
Most property developers had taken a wait-and-see attitude toward the property market and delayed sales of recently-developed apartments in Q1.
“In order to have more cash on hand, property developers may adjust their prices and adopt fast sales strategies to launch more new property projects in the coming months,” said Yang Guohua, a property analyst with Shanghai-based Orient Securities.
Since last year, the Chinese government has repeatedly emphasised its policies to curb the real estate market and imposed several cooling measures including a trial property tax, increasing down payments, implementing tighter monetary policies, banning third-home acquisitions and setting price control targets.
In its latest effort to curb property prices, the National Development and Reform Commission, the country’s leading economic planner, has ordered that from 1 May, property developers must sell residential properties at marked prices.
However, despite the implementation of these measures, prices remain high. Home prices in 100 major cities across the country climbed 0.4 percent from March to April, with 77 cities witnessing month-on-month increases, according to a report by China Real Estate Index System (CREIS).
“The persistent fever might force government to implement tougher control policies later this year as ongoing measures are mostly meant to regulate the new-homes market,” Mr. Zhang said.
well,this will certainly make their way bit difficult as they can not move with this anymore.
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