Migrant workers walk at a construction site in Beijing. The Chinese government has implemented a string of measures to control home price hikes over the past two years. Photo: EPA
Source:
https://scmp.com/business/china-business/article/2158096/mainland-developers-downcast-over-survival-china-gets China Business
Developers downcast over survival as China gets serious on stabilising home prices
The mood at the Boao Real Estate Forum in Hainan was particularly downbeat as builders expect to feel the squeeze over the coming quarters
Executives of property companies at the Boao Real Estate Forum in Hainan on Thursday were worried over the future of the industry amid China’s moves to curb home prices. Photo: Reuters
There is a consensus among mainland Chinese property developers that the going will get tough in the second half and into 2019 after the country’s top political body made it clear that policymakers would work on stabilising home prices.
In a statement after the meeting of the Communist Party’s Politburo – made up of 25 of China’s most senior leaders – on July 31, officials said that while growth and stability would underscore the nation’s economic policies in the second half, they remained firm on “containing home price gains”, although they removed the word “excessive” from the phrase used in the previous policy stance.
“The recent announcement tells everyone exactly the future of the industry, the only question is who can survive,” Li Jun, executive director of Hong Kong-listed mainland developer Greentown China Holdings, told the Post on the sidelines of the Boao Real Estate Forum in Hainan on Thursday. “An even worse environment will be seen in 2019.”
Wu Jianbin, executive vice-president of Fujian-based Yango Group, believed the government meant business this time. “The top government officials must have carefully weighed the wording as it is very severe.”
For nearly two years now China has been working on measures to cool down the property market, with at least 90 introduced so far this year.
Some cities have swiftly implemented a slew of measures to echo the message from the Politburo meeting. Shenzhen, for example, said on Tuesday it would restrict property owners from selling their flats for three years after purchase, ban purchases by companies and organisations to plug a loophole used to skirt current restrictions, and tighten loan policy for divorcees of less than two years amid a growing number of people using divorce to secure more loans.
As the headwinds grow stronger, developers are seeking to unload their stock, particularly in third- and fourth-tier cities, to maintain liquidity.
“Home prices in third- and fourth-tier cities may go down,” said Yu Ying, senior vice-president of Baoneng Group.
He added that his company would not participate in bids for land auctions. “Private developers may even have to lose some money to get rid of some projects.”
Developers will hand in pretty bad-looking financial results in the coming quarters
The profits of mainland Chinese developers have also been squeezed by soaring land prices, and now the tightening curbs on home prices are tightening the noose.
“Developers are feeling the pain as land in major cities is becoming more expensive while selling prices are capped by local governments,” said Luo Shaoying, chairman of Chongqing-based Dowell Real Estate, adding that she did not expect some of its projects to make as much money as expected.
Greentown China’s Li said that the downbeat mood would spread to the whole industry. “Developers will hand in pretty bad-looking financial results in the coming quarters.”