Home prices in second-tier Chinese cities could fall another 25 percent while prices in other cities could see declines in the 10-20 percent range following sluggish sales and financial woes at some developers, according to leading global investment banks and brokerages.
JP Morgan Chase expects a 25 percent slide in home prices in tier-2 cities and a drop of 20 percent in others, while Deutsche Bank said prices could drop by 10 percent to 20 percent this year, after sales in April and the May Day holiday period came in below expectations, Apple Daily reported Thursday.
Rumors of potential bankruptcy of real-estate developer Guang Group, which has delayed several projects in Huizhou in Guangdong province, will only darken the sector outlook further. Guang Group, which figures among the top 100 Chinese developers, has pledged some projects to its contractors and suppliers due to fund shortage, according to media reports.
The Supreme People’s Court website reveals that the developer was involved in two loan defaults worth a total 160 million yuan (US$25.66 million), Apple Daily reported. Many financial institutions are also said to have blacklisted the firm.
According to JP Morgan, Hopson Development (00754.HK) and Greentown China (03900.HK) are likely to see their shares suffer the most, with declines of as much as 70 percent and 68 percent respectively, the report said.
Deutsche Bank, meanwhile, is said to have rated Shimao Property (00813.HK), Evergrande Real Estate (03333.HK) and Country Garden Holdings (02007.HK) as “sell”, and slashed the target price on China Overseas Land & Investment (00688.HK) by 13 percent to HK$27.74.
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