A NUMBER of small developers — the kind that by sheer weight of numbers dominate China’s vast property sector — are set to report big drops in earnings or even losses as the industry grapples with tight credit, sluggish sales and excess supply.

    China Overseas Grand Oceans (COGO) was the first mainland developer off the block Thursday, when it reported a 31 percent drop in first-half net profit and flagged a gloomy industry outlook due to high inventories and tight credit.

    The first-half results are likely to stand in contrast to the performances of larger players, which have weathered the downturn relatively better thanks to their greater exposure to top-tier cities, pricing power and easier access to credit.

    The pressure on smaller developers is significant because they make up the major chunk of a sector that accounts for more than 15 percent of China’s gross domestic product. The top 10 players account for less than 20 percent of the market by sales.

    “Big players have good execution, so their profit will be better. Small players offer more price cuts,” said Raymond Ngai, head of greater China Property Research at Bank of America Merrill Lynch.

    COGO, which focuses on third-tier cities, cut its full-year sales target by 22 percent to HK$18 billion (US$2.3 billion) Thursday and said it does not expect to post a profit growth for 2014. Its gross margin fell 3.7 percentage points from a year ago to 29 percent.

    “Currently, real user demand in third-tier cities is limited,” said company chairman Hao Jianmin. (SD-Agencies)