Mainland property developers reported impressive January sales figures, led by China Overseas Land & Investment (0688.HK) which booked a 241% year-on-year increase in contract sales to US$527 million for the month. Poly Real Estate (600048.SH) recorded sales of US$483 million, up 142%, while Evergrande (3333.HK), which listed in Hong Kong in November, said January sales were up 331% to US$510 million.
Three-digit year-on-year increases in sales, both in terms of volume and value, was anticipated by the market on base effects and the unparalleled level of lending seen last year; China’s commercial banks issued an estimated US$201 billion last month – more than the combined lending of the previous quarter – ahead of imminent tightening measures.
With fears of a clampdown on lending and downward pressure on prices in the second half, analysts and investors are becoming more bearish on the sector, with Morgan Stanley recently downgrading China property stocks to “in-line” from “attractive.” However, mainland property should be considered a long play and, despite a possible uptick in some valuations amid first quarter earnings season, some good buying opportunities will arise.
Government policy is adjusting to allow for steady growth in housing prices and lessen the effects of recent boom-bust cycles ensuring medium- to long-term gains in both property stocks and the physical market.
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