Analysts say only the strongest brands among 200 Hong Kong-listed mainland developers will survive
May Chan 26 October 2011
The 200 or so mainland property developers listed on Hong Kong and mainland exchanges are tipped to have a tough time in the next few years, with some likely to shut down because of the squeeze on credit and the property market, analysts say.
Hu Yifan, managing director and chief economist of brokerage firm Haitong Securities, said a consolidation and reshuffle of the mainland property sector would be inevitable.
“There are about 200 listed mainland property developers in Hong Kong and China,” Hu said. “The big question is how many will survive the next two years?”
Hu said only “good names” were likely to stay in the game. She also predicted that over half of the 20,000 unlisted small- and medium-sized real estate companies on the mainland would disappear in the next five years or so.
Despite a significant drop in sales volumes, property prices in first-tier cities, such as Beijing and Shanghai, had yet to decline, Hu noted. In Beijing, falling sales left developers holding an estimated 16 months of inventory in September, compared with an average level of five to eight months.
Measured by total gross floor area, sales across the nation were up about 13 per cent in September versus the previous month according to the China Real Estate Index System.
The increase was driven by rising sales in second- and third-tier cities, where gross floor area was up some 13 per cent. In the 20 largest cities, sales measured by gross floor area were down 7 per cent over the period.
The continuing increase in total sales volumes around the nation and stubbornly high prices in the big cities suggested that the central government would continue its tightening measures, Hu said.
In those circumstances, developers with major exposure to larger cities could bear the brunt of any further policy measures aimed at curbing demand and bringing down prices.
Echoing these warnings, an analyst’s report released last week by capital markets advisory firm CCB International said mainland property developers that had not by now achieved at least 65 per cent of their annual contracted sales targets would come under pressure.
Agile Property, the report noted, had reached only 64.1 per cent of its full-year target of 37 billion yuan (HK$45 billion) by the first week of October. It also had heavy exposure in Guangzhou and Shanghai.
Greentown China, on the other hand, had achieved 66 per cent of its annual target, which was revised to 40 billion yuan from 55 billion yuan. The developer had a net gearing ratio of 257 per cent. Its major business was in the Yangtze River Delta region.
Hugo Hou, a property sector analyst for Haitong, said home prices on the outskirts of major cities could fall significantly in the next few months as developers continued to feel the credit squeeze. Hou predicted the fall in home prices in non-core districts of Beijing could reach over 10 per cent.
But he said mainland developers focusing on commercial projects in second- and third-tier cities could still see plenty of room for growth, since cooling measures only applied to residential projects.
Shopping malls that catered for mass market demand and that provided jobs in the service sector, like those hosting cinemas, supermarkets, and other mass entertainment facilities in small- and medium-sized cities, could provide “blue waters” for local developers, as others focus on upmarket shopping mall projects in major cities, said Hou.
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Hard times ahead as cooling efforts kick in
Analysts say only the strongest brands among 200 Hong Kong-listed mainland developers will survive
May Chan
26 October 2011
The 200 or so mainland property developers listed on Hong Kong and mainland exchanges are tipped to have a tough time in the next few years, with some likely to shut down because of the squeeze on credit and the property market, analysts say.
Hu Yifan, managing director and chief economist of brokerage firm Haitong Securities, said a consolidation and reshuffle of the mainland property sector would be inevitable.
“There are about 200 listed mainland property developers in Hong Kong and China,” Hu said. “The big question is how many will survive the next two years?”
Hu said only “good names” were likely to stay in the game. She also predicted that over half of the 20,000 unlisted small- and medium-sized real estate companies on the mainland would disappear in the next five years or so.
Despite a significant drop in sales volumes, property prices in first-tier cities, such as Beijing and Shanghai, had yet to decline, Hu noted. In Beijing, falling sales left developers holding an estimated 16 months of inventory in September, compared with an average level of five to eight months.
Measured by total gross floor area, sales across the nation were up about 13 per cent in September versus the previous month according to the China Real Estate Index System.
The increase was driven by rising sales in second- and third-tier cities, where gross floor area was up some 13 per cent. In the 20 largest cities, sales measured by gross floor area were down 7 per cent over the period.
The continuing increase in total sales volumes around the nation and stubbornly high prices in the big cities suggested that the central government would continue its tightening measures, Hu said.
In those circumstances, developers with major exposure to larger cities could bear the brunt of any further policy measures aimed at curbing demand and bringing down prices.
Echoing these warnings, an analyst’s report released last week by capital markets advisory firm CCB International said mainland property developers that had not by now achieved at least 65 per cent of their annual contracted sales targets would come under pressure.
Agile Property, the report noted, had reached only 64.1 per cent of its full-year target of 37 billion yuan (HK$45 billion) by the first week of October. It also had heavy exposure in Guangzhou and Shanghai.
Greentown China, on the other hand, had achieved 66 per cent of its annual target, which was revised to 40 billion yuan from 55 billion yuan. The developer had a net gearing ratio of 257 per cent. Its major business was in the Yangtze River Delta region.
Hugo Hou, a property sector analyst for Haitong, said home prices on the outskirts of major cities could fall significantly in the next few months as developers continued to feel the credit squeeze. Hou predicted the fall in home prices in non-core districts of Beijing could reach over 10 per cent.
But he said mainland developers focusing on commercial projects in second- and third-tier cities could still see plenty of room for growth, since cooling measures only applied to residential projects.
Shopping malls that catered for mass market demand and that provided jobs in the service sector, like those hosting cinemas, supermarkets, and other mass entertainment facilities in small- and medium-sized cities, could provide “blue waters” for local developers, as others focus on upmarket shopping mall projects in major cities, said Hou.
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