Friday 20 April 2018

China housing curbs put focus on builders' growth

President Xi Jinping will introduce a property tax to curb Chinese house price growth
President Xi Jinping will introduce a property tax to curb Chinese house price growth

Moxy Ding and Emma Dong

As earnings season kicks off for large Chinese real estate developers, analysts are not just interested in their financial reports. They also want to know what the future entails.

The government's efforts to cool the property market and China's deleveraging drive puts the focus on how these companies will navigate through this.

Two weeks ago, a National People's Congress spokesman said a property tax bill is being drafted as President Xi Jinping rolls outs measures to try to stabilise the housing market and the nation's banking regulator earlier called for steps to reduce household debt.

While most analysts expect strong full-year results for 2017, all eyes are on the future prospects for property companies. To gauge growth prospects for developers, investors will watch for information on plans to buy land.

According to data from China Real Estate Information Corp., the four biggest developers in terms of contract sales last year - Country Garden, Sunac China, Evergrande and China Vanke Co. - bought the most land in order to expand their market share.

China Overseas Land & Investment Ltd. and Longfor Properties Co. accelerated their land purchases in January and February, while Sunac slowed down after a flurry of deals and land acquisitions in 2017.

"Even if the land prices could come down, the overall prices in tier-one and two cities are still very expensive, " said Toni Ho, an analyst at RHB OSK Securities Hong Kong Ltd..

In a tightened liquidity environment, financial strength and strategy in selecting new land sites would be key things to watch, Ho said by phone.

(Bloomberg)

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