Property de­vel­op­ers face up­hill bat­tle

China Daily (Canada) - - BUSINESS - By XIN­HUA

China’s property de­vel­op­ers face an up­hill bat­tle as home sales con­tinue to de­cline and prof­its dwin­dle.

Among the 117 de­vel­op­ers listed on the Shang­hai and Shen­zhen stock ex­changes, 61 posted shrink­ing prof­its or even losses for the first three months, ac­cord­ing to sta­tis­tics com­piled by Centaline Property Agency Ltd.

To­tal net prof­its of the 117 de­vel­op­ers stood at 9.65 bil­lion yuan ($1.55 bil­lion) for the first quar­ter, down 27 per­cent from the same pe­riod last year, the data showed.

The re­sults should not come as a sur­prise as China Vanke Co Ltd, the coun­try’s largest de­vel­oper by rev­enue, had its first quar­terly profit de­cline since 2002.

The Shen­zhen-based China Vanke, widely seen as a bell­wether for the res­i­den­tial mar­ket in China, reg­is­tered a 5.2 per­cent drop in first-quar­ter prof­its with a 32 per­cent fall in rev­enue.

The dis­ap­point­ing per­for­mance came amid fall­ing home sales na­tion­wide. Of­fi­cial data showed sales of res­i­den­tial property dipped 7.7 per­cent dur­ing the first quar­ter to 1.1 tril­lion yuan, while sales by res­i­den­tial area con­tracted 5.7 per­cent to 178.25 mil­lion square me­ters.

De­vel­op­ers have also been lan­guish­ing in the land auc­tion mar­ket.

The top 20 de­vel­op­ers by home sales bought less land in the first four months. The value of the land they bought de­creased from 60.1 bil­lion yuan in Jan­uary to 32.56 bil­lion yuan in Fe­bru­ary, then con­tin­ued to drop to 25.45 bil­lion yuan in­March and to 13.3 bil­lion yuan in April, ac­cord­ing to Centaline.

De­clin­ing sales, fall­ing prof­its and lower land pur­chases all point to a property mar­ket that has lost steam.

Zhu Zhongyi, vice-pres­i­dent of the China Real Es­tate As­so­ci­a­tion, at­trib­uted the weak first-quar­ter fig­ures to a high com­par­i­son base, com­bined with tougher lend­ing con­di­tions.

Home sales saw “ex­plo­sive” growth in early 2013, as people scram­bled to buy homes ahead of the im­ple­men­ta­tion of a tight­en­ing mea­sure on March 31 of last year, said Zhu.

An­other fac­tor

is a

credit crunch for de­vel­op­ers buy­ers that be­gan late year, Zhu added.

More sup­ply of sub­si­dized hous­ing for low-in­come house­holds has di­verted a por­tion of de­mand and dented the mar­ket, said Hu Jinghui, vice pres­i­dent of the Bei­jing-based property con­sul­tancy Bacic & 5i5j.

More low-in­come hous­ing and credit tight­en­ing have locked de­vel­op­ers and po­ten­tial buy­ers in a stale­mate. Po­ten­tial buy­ers are tak­ing a “wait and see” at­ti­tude, and de­vel­op­ers are woo­ing buy­ers with lower prices, said Zhang Dawei, chief an­a­lyst at Centaline. and last

Sup­pressed de­mand and more dif­fi­cult credit ac­cess have sent smaller de­vel­op­ers reel­ing. A small de­vel­oper in Fenghua in east China’s Zhe­jiang prov­ince went bust af­ter it de­faulted on a 3.5 bil­lion yuan debt ear­lier this year.

Oth­ers that sur­vived have re­sorted to price cut­ting. For ex­am­ple, in Hangzhou, de­vel­op­ers made price cuts in the hope of get­ting apart­ments off their books faster. Some de­vel­op­ers slashed prices by more than 30 per­cent, in­di­cat­ing pres­sure to clear their in­ven­to­ries.

Weak de­mand has forced gov­ern­ments and de­vel­op­ers into ac­tion. Nan­ning, in the Guangxi Zhuang au­ton­o­mous re­gion, re­laxed its pol­icy on home pur­chas­ing in late April.

More sec­ond-tier cities are ex­pected to loosen property curbs if de­mand re­mains sub­dued.

Hous­ing prices in first-tier cities and most sec­ond-tier cities are un­likely to ex­pe­ri­ence “big cor­rec­tions,” said Zhang.

But this fore­cast is based on the as­sump­tion that the con­fi­dence of po­ten­tial buy­ers in big cities will re­main strong and that the “wait and see” mood will not spread to more po­ten­tial buy­ers, Zhang added.

Newspapers in English

Newspapers from China

© PressReader. All rights reserved.