Property is a pillar of China’s economy, accounting for a quarter of all investment.
China’s residential sales revenue fell 20.1% in 2008, with housing prices down over 30% in some Chinese cities as the growth in the world’s third largest economy slowed.
Premier Wen Jiabao told the National People’s Congress this month that China would take vigorous steps to stabilize the property market, hinting that real estate firms could receive government stimulus funds and loans from state-controlled banks.
Local governments are also allowing developers to defer land cost payments to support cash strapped firms.
While help for the sector is clearly forthcoming, such aid could be limited to stronger firms, as the government’s main aim is to stabilize rather than revitalize the sector, analysts said.
‘Those with low gearing are in a better position to benefit,’ said Paul Cheng, chief financial officer of Coastal Greenland (1124.HK), one of the smallest but highly geared developers which aims to speed up sales to meet debt obligations.
Reuters reported Vanke Chairman Wang Shi as saying many mainland property firms could face financing difficulties in 2009, providing an opportunity for companies with solid balance sheets to buy smaller rivals or land at low-cost.
Vanke has downsized its housing start target by 23% in 2009 after it recorded a 17% fall in 2008 profit.
SOHO China, which secured $1.46 billion in loan facilities from Bank of China, observed it is ‘now quite rare’ to see lenders willing to commit huge facilities during the credit squeeze, Chairman Pan Shiyi recently said.