Builder fi­nanc­ing may be lim­ited

China Daily (Hong Kong) - - FRONT PAGE - By WU YIYAO in Shang­hai and LI XIANG in Bei­jing Con­tact the writ­ers at wuyiyao@chi­nadaily.com.cn

Chi­nese reg­u­la­tors may bar se­cu­ri­ties and fu­tures firms from run­ning pri­vate as­set man­age­ment funds that di­rectly or in­di­rectly in­vest in res­i­den­tial prop­erty projects in key cities.

The move would be aimed at curb­ing spec­u­la­tion and cool­ing off the prop­erty mar­ket, an­a­lysts said. It also would rule out as­set man­age­ment as a fi­nanc­ing tool for the res­i­den­tial prop­er­ties mar­ket in those cities, they said.

A re­port by 21st Cen­tury Busi­ness Herald cited sources close to the mat­ter as say­ing the key cities are 16 first- and se­cond-tier cities, in­clud­ing Bei­jing, Shang­hai, Guangzhou and Shen­zhen. The list is be­ing drawn up based on the record of lo­cal hous­ing author­i­ties in con­trol­ling the rise in res­i­den­tial prices.

“Delever­ag­ing will be a key task for China’s reg­u­la­tors next year, and the prop­erty in­dus­try will be among the first sec­tors to feel the pain,” said Wang Jian­hui, di­rec­tor of the re­search cen­ter at Cap­i­tal Se­cu­ri­ties Co Ltd.

“In ad­di­tion to tight­en­ing bank loans, the reg­u­la­tors will very likely curb the lever­ag­ing in shadow bank­ing ar­eas. For this rea­son, tight­en­ing con­trol of cap­i­tal flow­ing into the prop­erty sec­tor is within ex­pec­ta­tions,” Wang said.

Delever­ag­ing is re­duc­ing the pro­por­tion of bor­rowed money in the econ­omy, and lever­ag­ing refers to in­vest­ing with bor­rowed money.

Xia Lei, prop­erty an­a­lyst at Founder Se­cu­ri­ties Co, said tight­en­ing mea­sures could pro­vide an op­por­tu­nity for cashrich prop­erty com­pa­nies to over­take their com­peti­tors since some firms might be forced to sell their projects.

“Curb­ing spec­u­la­tive cap­i­tal from en­ter­ing the res­i­den­tial prop­erty mar­ket could help con­sol­i­date the sec­tor and con- tain risks and sharp fluc­tu­a­tions,” Xia said.

Real es­tate an­a­lysts said mar­ket play­ers are be­com­ing more ra­tio­nal and more pru­dent as reg­u­la­tors in­creas­ingly urge de­vel­op­ers to delever­age their cap­i­tal and en­hance trans­parency of fi­nanc­ing tools and sources. This is re­flected in bid­ding prices for land, they said.

In Shang­hai, the midyear fi­nal price of­fered for land parcels was run­ning some 40 per­cent higher than the min­i­mum bid price. But in re­cent bids, the rate dropped to some 5 per­cent, ac­cord­ing to Shang­hai land auc­tion author­i­ties.

Wu Huimin, di­rec­tor of res­i­den­tial prop­erty at real es­tate com­pany DTZ China, said that mul­ti­ple, long-term mea­sures are the way to sta­bi­lize hous­ing prices, and many mea­sures are likely to be used to reach the goal.

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