Longfor confident in sales target

Longfor Properties Co Ltd expressed confidence on Monday in meeting its full-year sales target, as strong demand drove a sharp rebound in the property market.

First-half sales were 22.4 billion yuan ($3.6 billion), or 49 percent of its 2013 goal, the Beijing-based company said in its interim results. Chief Executive Officer Shao Mingxiao said that there is "no problem" to meet the target.

Longfor said last week that July sales jumped 44 percent year-on-year and 2.1 percent month-on-month to 4.42 billion yuan, representing 334,000 square meters of property.

Average new home prices in 70 major Chinese cities climbed 0.7 percent month-on-month in July, easing from June's rise of 0.8 percent, according to Reuters calculations from data released by the National Bureau of Statistics on Sunday. On a year-on-year basis, prices in Beijing, Guangzhou, Shenzhen and Shanghai, China's four biggest cities, jumped 18.3 percent, 17.4 percent, 17 percent and 16.5 percent, respectively.

Overall, prices showed the biggest jump since 2011, when Beijing rolled out tough property control steps.

Shao said the price rebound this year is being driven by real demand by first-time buyers, not speculators.

Speculative demand in the property market has fallen from more than 40 percent in the early 2000s to about 10 percent now, marking a market transformation, said Shao.

Price hikes are expected to continue for the rest of the year, as the Political Bureau of the CPC Central Committee didn't mention property at all in a major statement last month, a sign that current control measures won't get tougher.

The property market is pivotal in the Chinese economy, and a more robust market will help generate much-needed economic growth and make sure that China meets its GDP growth target of 7.5 percent this year.

Despite the strong sales, Longfor's net profit edged up just 0.9 percent to 3.85 billion yuan. That includes a 1.55 billion yuan gain in the fair value of commercial properties that have yet to be rented. Profit would have declined without that gain.

Longfor shares were down 0.89 percent in Hong Kong to HK$13.38 ($1.73) on Monday.

The profit margin fell about 15 percentage points to 31.9 percent. Chief Financial Officer Wei Huaning said price discounts had cut the margin. Longfor was among the first batch of developers to discount prices in 2011 when the market was shaken by strong national controls on property.

Wei said the margin won't fully bounce back until 2015.

Longfor was an active land buyer in the first half, spending 10.78 billion yuan on 10 sites in eight major cities, totaling more than 3.5 million sq m in gross floor area.

Shao said the company made the purchases because prices are "favorable" and land purchases in the second half will be made at a slower pace.