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QINGDAO TODAY
在线翻译:
szdaily -> Business -> 
Developers buy less land as housing sales weaken
    2019-08-13  08:53    Shenzhen Daily

PROPERTY developers are slowing land purchases and plan to be more selective about where they build, as sales soften from tightening measures and a slowing economy.

Market confidence has been hit by the Sino-U.S. trade tensions and buyers continue to be wary even though there have been recent signs of a loosening in policy in certain cities.

Contract sales by the top 100 Chinese developers in July posted a 29 percent decline from June, data from research firm CRIC showed, while the value of land sold in the 300 cities it tracks dropped 16.6 percent. Land premiums also softened 6 percentage points to 13 percent in July, returning to levels seen at the start of the year.

After two years of breakneck growth, China’s property market hit a downturn in the second half of last year following a series of cooling measures by the government to contain prices. The government recently dashed hopes it would loosen its grip on those measures to stabilize the economy, saying it will not use the property market as a form of short-term stimulus.

An official of Shanghai-based property developer CIFI Holdings said the company, one of the country’s top 20, will buy less land for the rest of the year than originally planned.

“When sales are not so optimistic, buying less land would be a new norm for the industry,” he said.

Developers usually spend 30 percent to 40 percent of their contracted sales during the period to replenish land.

Guangzhou R&F Properties, whose sales in the first seven months gained 5 percent on the year, a significant drop from 51 percent growth a year earlier, said in an internal document last week it would stop land purchases altogether in the second half of the year.

It also asked staff to speed up sales as the figure so far — at 71 billion yuan (US$10.1 billion) as of the end of July — was still a distance from the full-year target of 160 billion yuan.

Large developers usually own landbanks that can last for three years of development. In the first six months this year, the top 50 developers acquired 6.4 percent more new land parcels than a year ago in terms of area, according to CREIS data.

Picking land parcels strategically is also becoming increasingly important, and difficult. One mid-sized developer said they prefer second and third-tier cities with less restrictive measures, yet with a net population inflow so that the company can still expect a high turnover.

Analysts expect margins for developers to start to decline from the first half of this year due to rising land costs and housing price caps.

“Given the falling margin trend, we think some companies could lower their 2019 earnings guidance,” UBS head of China real estate research John Lam said. He expected most companies would keep their 2019 sales targets but become more prudent in setting 2020 sales growth outlooks.(SD-Agencies)

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