13 December 2018

Expect more currents in calmer property market

One of the major concerns in the property market before the Lunar New Year is the possible impact of tight credit on the sector.

Mortgages are the first to suffer as Chinese lenders tighten lending and raise interest rates to attract more deposits. In the first week of 2014, property transaction volumes in 16 major cities have shrunk over 20 percent.

Jiang Han, a columnist for the Hong Kong Economic Journal, predicts the mainland property market will continue to grow this year, although not as frenetically as in 2013.

Credit easing is no longer the global trend as the US Federal Reserve starts scaling back its bond-buying program.

Although Jiang believes the central government won’t launch new curbs on the property market this year, China needs to stabilize its currency and contain its inflation, which means it won’t relax its monetary and financial policies either.

In November last year, Premier Li Keqiang {李克強} warned that “printing more money may lead to inflation”.

Under such circumstances, mainland property developers can expect some negative impact. However, developers have several means to sail relatively smoothly through the year, Jiang said.

First of all, developers should have enough cash in hand. Those listed outside the mainland have more opportunities to raise funds. Guangzhou R&F Properties (02777.HK) and Kaisa Group (01638.HK), for example, have both issued debt recently, with an average yield above 8.5 percent.

Secondly, they could explore business opportunities overseas. Companies like Greenland Hong Kong (00337.HK), Country Garden Holdings (02007.HK) and Vanke Property Overseas (01036.HK) are developing projects in England, Malaysia and United States. Although these projects are at their initial stages and couldn’t contribute much, it’s a great way for the firms to diversify risks.

Those who consider the mainland as their major market should strengthen their branding and quality, Jiang said. This is important amid rising housing supply in the market, especially in the lower-tier cities. As gross margins in the industry drop, players could only hope to protect or boost their market share by selling quality homes, he said.

– Contact the writer at [email protected]



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