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December 27, 2014

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Small developers to phase out

CHINA’S real estate industry will keep slowing down that will ease out small property developers and restructure the industry in the years to come, a top think-tank said yesterday.

A report by Chinese Academy of Social Sciences show 30 to 40 percent small-sized developers will be out of business in two years due to overcapacity, leading to an emerging oligopoly market formed by big players such as China Vanke and Evergrande Group.

“Big developers have maintained its growth pace in a downturn environment, which means small players are being forced out even faster,” Zou Linhua, a financial strategic researcher from Chinese Academy of Social Sciences, said at a news conference yesterday. “China’s era of big developers is coming.”

The report dismissed the possibility of a housing market crash, and predicted that the government would put in place necessary policies to shore up the market and to relax property purchase restrictions next year.

“We must clearly recognize that the property market won’t be able to contribute as much gross domestic product as it did in the past,” said Ni Pengfei, director of City and Competitiveness Research Center at the academy. “The real estate price in tier-one and tier-two cities will keep sliding while tier-three or tie-four cities will decrease slightly. A reasonable regulation should be put out to stabilize the market.”

The property investment ratio in GDP dropped 0.35 percentage point to 0.48 percent in 2014, making it the most leading factor of a cooling economic growth, according to the report.

China’s home sales value shrank 7.8 percent year-on-year during January to November this year, compared to the 26.3 percent surge in 2013 and the 10 percent increase in 2012, according to the National Bureau of Statistics.

New housing projects also fell 9 percent in the first 11 months from a year earlier.


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