Curbs likely to dent results in first half
Mainland property developers are expected to unveil a mixed bag of first-half earnings this week - with the balance sheets of some developers affected by austerity measures aimed at curbing demand.
And while major developers had so far weathered the policy measures quite well, the second half of the year could see their earnings under pressure, analysts said.
'It's unrealistic to expect the government to loosen curbs within the next six to 12 months since it has not achieved the policy targets yet,' Bocom International property analyst Toni Ho said. 'But we also don't think Beijing will launch any more major tightening measures considering the increasing uncertainties in the global economy.'
Following the introduction in January of a new package of austerity measures to rein in property demand and soaring prices in major cities, the central government plans to extend home-buying restrictions to more second- and third-tier cities at the end of this month. More than 40 cities moved to restrict homeowners from buying more than two flats.
The State Administration of Foreign Exchange also imposed restrictions last month on property developers using offshore financing in an attempt to block 'hot money' flows into the real estate sector.
So far the measures have failed to have much impact on demand, judging by data released by the National Bureau of Statistics last week. The data showed that property investment grew as much as 33.6 per cent in the first seven months of the year. Total property sales increased 13.6 per cent, and average housing prices rose 10.2 per cent during the period.
Some leading property developers said their sales performances were not greatly affected by the policies due to diversified business and adjusted marketing strategies. But others said they did not meet their first-half sales targets.
Developers, including Longfor Properties, Agile Property, Sino-Ocean Land, Beijing Capital Land and KWG Property, said earlier they met 40 per cent to 50 per cent of their annual sales targets by the end of July.
Alan Chiang Sheung-lai, from mainland property consultancy DTZ, said slower sales growth could dent earnings for smaller developers. 'Bigger developers are more resilient in the face of the government's tightening measures,' he said.
Many big players, like China Resources Land and Longfor, developed projects and established strong brands in cities where no restrictions had yet been implemented. These locations were becoming increasingly important profit contributors, compared with weaker markets in Beijing, Shanghai and other big cities.
Looking at the market outlook for the second half, Chiang forecast home supply would increase significantly since new construction areas rose by 24 per cent year on year in the first half. Developers would therefore be under pressure to cut prices to shift their inventory.
Longfor Properties, Agile Property, Sino-Ocean Land, Beijing Capital Land, Country Garden, Overseas Chinese Town (Asia), Chinese Estate Holdings, China SCE Property, China Resources Land and KWG Property will release results this week.