Property developers will not find this year as “severe” as the slowdown in 2008 or as volatile as 2009, but mid-2010 could be decisive for many firms as more supply comes online while government policy softens demand, ratings firm Standard & Poor’s said.
The central government has already taken action to cool prices that rose 9.5% year-on-year in January. These include raising mortgage rates and downpayment requirements on third-home purchases and reintroducing a 5.55% business tax for owners who sell their homes less than five years after purchase. Beijing’s local government also reversed all market support measures introduced in 2008.
S&P said more cooling measures could be on the way such as interest rate hikes, tougher mortgage requirements or even a direct property tax. However, developers with “good cash flow and balance sheets, ample financial flexibility, and disciplined financial management” may not be badly hit, S&P noted. Such could indeed be in a position to profit from the tightening credit conditions buy absorbing smaller developers struggling to complete projects.
China Overseas Land & Investment (0688.HK), China Resources Land (1109.HK), Agile Property (3383.HK) and Evergrande (3333.HK), which recently listed in Hong Kong, are among those who will likely see out the year unscathed by austerity measures. Highly leveraged firms or developers that spent excessive amounts on land in the last year – such as Shanghai Zendai (0755.HK) and Greentown Holdings (3900.HK) – could be in for a rough ride.
You must log in to post a comment.