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Developers face curb on margins
By Cao Qian |
April 28, 2011, Thursday
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Print Edition
Print Edition
CHINA'S top planning body is studying ways to keep real estate developers' profit margins within reasonable levels as it continues to fight against house price bubbles.
The National Development and Reform Commission is currently conducting investigations into real estate companies' costs and profitability.
It is considering applying to mainstream residential housing a 1995 regulation on curbing excess profits, the China News Service reported yesterday, citing Xu Kunlin, head of the NDRC's pricing supervision department.
The country is to launch a batch of new measures to further regulate developers' pricing practices and this initiative to curb excess profits would be a major element, Xu said.
"Profiteering in China's property market is high," said Mei Xinyu, a researcher with the Chinese Academy of International Trade and Economic Cooperation.
While affirming the need to cool China's overheated property market by cracking down on profiteering, Mei told Xinhua news agency that the government faces challenges in actually taking action. China's anti-profiteering regulations, created in 1995 by the State Council, have been criticized for being incomplete and lacking detail.
"It will take great effort to overcome resistance from vested interests, who are used to huge profits in the sector, in implementing these new regulations," Mei said.
In March, the NDRC announced that from May real estate developers will not be allowed to charge buyers additional fees unless they have been informed in advance of extra costs.
This is intended to curb irregularities such as random pricing and cheating on prices during new property sales and ensure that every new property sold is priced properly.
Developers planning a price increase for their properties need to re-register with the watchdogs, the commission said.
"The latest battle against developers' excess profits has again indicated central government's wish to combat soaring home prices," said Song Huiyong, research director at Shanghai Centaline Property Consultants Ltd. "Earlier rein-in measures have only managed to slash home sales without triggering notable price cuts."
"However, I remain rather doubtful whether such an initiative will be practicable or not," said Song.
Real estate companies' profits on housing projects vary considerably, with the cost of land a major factor affecting margins.
Projects built on plots acquired a few years ago could enjoy high profit margins, whereas those developed on parcels purchased more recently through public auctions are likely to yield a margin of between 10 and 20 percent, industry analysts said.
The National Development and Reform Commission is currently conducting investigations into real estate companies' costs and profitability.
It is considering applying to mainstream residential housing a 1995 regulation on curbing excess profits, the China News Service reported yesterday, citing Xu Kunlin, head of the NDRC's pricing supervision department.
The country is to launch a batch of new measures to further regulate developers' pricing practices and this initiative to curb excess profits would be a major element, Xu said.
"Profiteering in China's property market is high," said Mei Xinyu, a researcher with the Chinese Academy of International Trade and Economic Cooperation.
While affirming the need to cool China's overheated property market by cracking down on profiteering, Mei told Xinhua news agency that the government faces challenges in actually taking action. China's anti-profiteering regulations, created in 1995 by the State Council, have been criticized for being incomplete and lacking detail.
"It will take great effort to overcome resistance from vested interests, who are used to huge profits in the sector, in implementing these new regulations," Mei said.
In March, the NDRC announced that from May real estate developers will not be allowed to charge buyers additional fees unless they have been informed in advance of extra costs.
This is intended to curb irregularities such as random pricing and cheating on prices during new property sales and ensure that every new property sold is priced properly.
Developers planning a price increase for their properties need to re-register with the watchdogs, the commission said.
"The latest battle against developers' excess profits has again indicated central government's wish to combat soaring home prices," said Song Huiyong, research director at Shanghai Centaline Property Consultants Ltd. "Earlier rein-in measures have only managed to slash home sales without triggering notable price cuts."
"However, I remain rather doubtful whether such an initiative will be practicable or not," said Song.
Real estate companies' profits on housing projects vary considerably, with the cost of land a major factor affecting margins.
Projects built on plots acquired a few years ago could enjoy high profit margins, whereas those developed on parcels purchased more recently through public auctions are likely to yield a margin of between 10 and 20 percent, industry analysts said.
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