Chinese developers expected to speed up sales in third quarter after meeting less than 30 per cent of sales targets for year as of May
- Sales revenues at China’s top 100 property firms in May showed a yearly decline of 60 per cent but also a month-on-month rise of 5.6 per cent, according to CRIC
- Developers’ contracted sales will see a strong recovery from June, on improving sentiment and supportive measures: CGS-CIMB Securities executive
Most Builders were behind on their annual targets, China Real Estate Information Corporation (CRIC), one of the largest real estate brokers in mainland China, said on Wednesday.
But there was some good news. Sales revenues at the country’s the top 100 property firms reached 454.7 billion yuan (US$68.1 billion) in May, which although represented a decline of 60 per cent from a year ago, also showed a month-on-month rise of 5.6 per cent, CRIC said. It looked like sales had found the floor and had stopped falling further from March and April, the broker said.
The sales were expected to be boosted further by supportive government policies. Banks in mainland China had recently cut mortgage rates by about 1 percentage point compared to a month ago and reduced down payment requirements for first-time homebuyers from 30 to 40 per cent to 20 to 30 per cent.
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“We believe that developers’ contracted sales will see a strong recovery from June onwards, on improving market sentiment on the back of a series of supportive measures announced in the past few weeks,” said Raymond Cheng, head of China and Hong Kong research at CGS-CIMB Securities International.
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“Buying confidence has not fully recovered, as buyers are concerned about builders being able to deliver homes on time. So, developers have to offer their projects at attractive prices to attract buyers,” said Andy Lee, CEO for southern China at Centaline Property Agency (China).
Meanwhile, the acquisition of land by property firms has shrunk significantly, according to the China Index Academy, the top 100 real estate companies acquired 468 billion yuan worth of land in the first five months of the year, down 64.7 per cent from a year ago.
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“The real estate slowdown has major implications for consumption and industrial production (steel, cement, glass etc),” said Wang Qi, co-founder of MegaTrust Investment (Hong Kong), a boutique China asset manager.
“Local governments in China also rely heavily on land sales for municipal finances. I don’t see an immediate crisis here. But given how China is trying to roll out more infrastructure spending this year, more special bonds are needed to offset the loss in land sales,” he added.