Disappointing result attributed to buyer hesitation and lack of new projects

Shimao Property Holdings Ltd, a major mainland developer, posted a 40 percent fall in its property sales in May from the previous month as tightening measures implemented by the central government recently aimed at reining in soaring real estate prices on the mainland have kept many home buyers at bay.

The developer sold 1.5 billion yuan worth of properties in May, down from 2.5 billion yuan in the previous month, Chairman Hui Wing Mau told Hong Kong investors Monday after the company's annual general meeting.

"The fall in sales was mainly due to the general wait-and-see attitude of home buyers following the government policies," Hui said.

"The absence of any new project launch also contributed to the decline in property sales," he added.

The market needs one to two months to adjust to the new policies targeting the real estate market, explained Vice-chairman Jason Hui.

Amid soaring property prices, which have caused outcries about property bubbles, mainland authorities have rolled out a series of tightening measures over the last couple of months, including restrictions on lending to non-resident buyers, a higher down-payment requirement for second-home purchases and the banning of mortgages for third-home purchases.

Hui, however, remains optimistic about the outlook for his company.

Sales in June are expected to rebound to the April level with the expected launch of 10 new projects, he said.

He reiterated his projection that the company's average selling price will rise above 10,000 yuan per square meter this year from only 8,993 yuan last year, despite the seemingly headwinds the sector is now facing.

On worries about a potential 15-25 percent fall in mainland property prices, as predicted by some analysts recently, which have sent developer stocks tumbling over last month, Chairman Hui said, "it is still too early" to predict by how much property prices will fall.

Property prices in some tier-2 and tier-3 cities could even rise further rather than decline as demand remains strong, he suggested, referring to housing demand as against investment demand.

The firm demand is growing with the country's on-going urbanization process, which sees around 30 million rural dwellers becoming urban residents every year.

Hui also emphasized that Shimao has no plans to cut prices for the time being, despite some other developers having taken that step, as sales in the mainland property market are slowing down in general following the government measures.

Last month, Evergrande Real Estate Group Ltd, announced that it will sell all projects at a 15 percent discount.

Meanwhile, Hui said the government's tightening measures will likely have a limited impact on Shimao's operation as the developer's land bank of 30 million square meters has been built on relatively low cost, with an average land price of only 1,600 yuan per square meter of gross floor area.

He said the company will continue to diversify its development project portfolio to include more commercial spaces and hotels in order to reduce policy risks.

The developer sold 9.5 billion yuan worth of properties in the first five months of this year, Hui said.

China Daily

(HK Edition 06/01/2010 page3)