Capital Gains Tax

China unit thrives despite austerity

PUBLISHED : Wednesday, 16 March, 2005, 12:00am
UPDATED : Wednesday, 16 March, 2005, 12:00am

Mainland cooling measures fail to stop property firm from making strong gains

New World China Land expects its sales profit margin to improve this year after Beijing's austerity measures have helped clear out smaller rivals.

The company, a 70 per cent-owned mainland property arm of New World Development, said it was not concerned the tightening measures would hit its business.

'The mainland property market has become more systematic and rationalised after the central government's austerity measures,' said New World China chairman Henry Cheng Kar-shun. 'This would be positive for foreign investors like us.'

The mainland-focused developer said its net profit surged 283 per cent year on year to $62.09 million, or 4.16 cents per share, for the six months to December.

During the first half, the company posted an attributable profit from property sales of $30.58 million, selling 331,711 square metres. This translates into a profit of a mere $92.20 per square metre.

Mr Cheng said the margin reflected the higher costs of older land stocks.

'We expect profit margin will improve for our upcoming projects,' said Mr Cheng.

New World China plans to complete projects comprising a total gross floor area of 856,000 sq metres this year - mainly in Guangzhou, Wuhan and Beijing - with 688,000 sq metres for homes and the remainder split between commercial and office space.

Sales rose 4.08 per cent to $951.74 million. The company declared no interim dividend.

The central government's austerity measures include tightened bank lending aimed at curbing property speculation.

The Shanghai municipal government has imposed a capital gains tax on properties sold within 12 months to cool its soaring property market.

The 5.5 per cent tax comprises a 5 per cent tax on the difference between the purchase and sale price and a 0.5 per cent construction and education tax.