Tuesday, April 20, 2010

Developers unfazed by China property curbs

Home sales may be hit in the short term, but they are upbeat on the long term

CHINA’S moves to cool home sales may have spooked some investors into selling property stocks, but developers with projects on the mainland remain unruffled by the changes.

A few property groups acknowledged that the measures might impact residential sales in the short term.

But most remained confident of China’s long-term prospects and backed the government for bringing more stability to the market.

‘We see the recent measures as timely and positive to calm the surging property market in China,’ said Keppel Land International executive director and CEO Ang Wee Gee. The group has a pipeline of over 30,000 homes in 10 Chinese cities.

‘In the short term, we can expect home buying volume to taper down. However, as housing aspirations remain strong riding on economic growth, rising affluence and urbanisation, the outlook remains healthy and positive for the longer term.’

The Chinese authorities have introduced a series of anti-speculation measures since last week to curb fast-rising home prices. These include higher mortgage rates and downpayment ratios, a ban on loans for third homes, and greater disclosure from developers on home supply and prices.

Some property companies with mainland exposure have seen their share prices fall in the last few days. Pure China play Yanlord lost 9.9 per cent from last Thursday – when China raised mortgage rates and downpayment ratios – to close at $1.73 yesterday.

Over the same period, Keppel Land dropped 4.4 per cent to $3.66 and CapitaLand slipped 4.8 per cent to $3.96. In a report on Monday, DMG & Partners analyst Brandon Lee downgraded his call on CapitaLand to ‘neutral’, expecting slower take-up at its residential projects in China.

CapitaLand plans to launch some 2,400 homes in six Chinese cities this year but it is not unduly worried. ‘Our portfolio is not only in residential development, but also in office buildings, shopping malls, serviced residences and mixed developments,’ said CEO of CapitaLand China Holdings Jason Leow. Because of this, ‘we are not overly impacted by any volatility in the residential market in China’. The group welcomed policies aimed at restraining speculative developers and home buyers.

Another developer Yanlord is optimistic that its customers – who tend to have high net worth – will be relatively shielded from the changes. ‘With significant disposable incomes, these individuals tend to be less sensitive to credit policy variations and are generally deemed to be of lower credit risk by banks,’ it told BT.

The anti-speculation moves may reduce new home sales and create pressure for smaller developers, but established players will benefit from greater clarity and better regulations, Yanlord added. It is confident about the potential of its landbank – which measured 4.23 million sq metres as at end-December – and will keep to its development schedule.

Fellow Chinese developer Pan Hong sees little speculation in its markets to begin with. Its executive chairman Wong Lam Ping said that the group is largely in second and third-tier cities and more than 90 per cent of buyers at its projects have been owner-occupiers. The cooling measures may have an impact on home sales but it will not be significant, he said.

Source: Business Times, 20 Apr 2010

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