jueves, 30 de agosto de 2018

Chinese property developers opt to ‘wait and see’ as failed land auctions climb | The Indian Express

Chinese property developers opt to ‘wait and see’ as failed land auctions climb | The Indian Express

Chinese property developers opt to ‘wait and see’ as failed land auctions climb

Some analysts say land sales data may not be up to date because of a lag between when transactions are completed and local governments record receiving the funds.

By: Reuters | Hong Kong | Published: August 30, 2018 10:43:19 am
Chinese property developers opt to 'wait and see' as failed land auctions climb
The number of failed land auctions more than doubled in the first seven months of this year. (Representational photo)

Last year China’s more aggressive property developers were willing to pay whatever it took to secure land banks, but today China is seeing a surge in failed land auctions. The trend has been especially noticeable in bigger cities since July as developers face reduced liquidity and thinning margins due to a prolonged tightening of government policy and a weaker macroeconomic environment.
On a single day this month, Jinan, a second-tier city in China’s northeastern Shandong province, saw eight plots of land go unsold at auction, 10 parcels change hands at the reserve price and one plot sold for a premium of less than 4 per cent.
22m
Selling At A Premium
BUY ME
Dominique bought her suburban family home - and it came complete with family - including her granny who lives in the basement.
Three days earlier on August 10, the second-tier city of Taiyuan in northern Shanxi province aborted eight auctions in what was expected to be its largest land sale in years, as bidding prices for two parcels failed to meet the minimum requirement and there were no bids for the other plots.
These were not isolated incidents. The number of failed land auctions more than doubled in the first seven months of this year to 796 from a year earlier, according to realtor Centaline, with major cities recording the highest number since 2015, and smaller cities posting a record.
Research from Chinese investment bank CICC showed the proportion of failed auctions climbed to 9.4 percent in the first three weeks of August, compared to 7.3 percent over the whole of July.
“It shows that the land market is regaining its senses, but for sure it doesn’t signal a depression because many corporates are still willing to buy land, just that they’re faced with many limitations,” said Yan Yuejin, a research director at real estate services company E-House China.
Yan added that the number of failed auctions also illustrated a gap between market demand and local governments’ sale conditions and prices – which are set at bull market levels.
Despite the spike in the number of failed land auctions, property investment growth accelerated in July at its quickest pace in nearly two years, official data showed, and as local governments sold more land to tame property prices, giving developers more choice.
Some analysts say land sales data may not be up to date because of a lag between when transactions are completed and local governments record receiving the funds.
“China’s economic data is artificial and doesn’t give real references; the number of failed auctions tells you about the real market sentiment,” said a chief financial officer of a major developer who declined to be identified because he was not authorised to speak to the media.
“The major cause is the bleak market outlook shared among the industry,” he said, a far cry from the days of “land king” developers willing to splash out vast sums.
Developers said local government regulations put in place early last year, including effectively capping the initial sale price of new homes and a requirement to build housing to rent rather than sell, was threatening their cashflow and margins.
“Another developer bought a land parcel in Xiamen last year for 38,000 yuan per square meter. We bought one this year for only 25,000, said a finance officer at a Shenzhen-based developer, who declined to identified because he was not authorised to speak to the media.
“It’s important not to buy at a high premium so we can keep the gearing and margins,” said the officer.
“Failed auctions in July definitely hurt sentiment, and because of the trade tension between China and the United States, we stopped buying land in April. We will wait and see until October,” he added, pointing to uncertainties in the macro-economic environment that could further dampen China’s economic growth, and hence the property market.
Many major developers including state-owned China Overseas Land & Investment and CIFI Holdings have also slowed their land purchases, but are ready to get back into the market if they see bargains in the second half. For that reason, economists and developers said land purchases could tick up in the fourth quarter.
“After the drop in bidder number and land premium, there should be (buying) opportunities in the second half,” China Overseas Land chairman and CEO Yan Jianguo told an earnings conference last week.
CIFI chairman Lin Zhong said while he expected to buy less land in the second half, he forecast a larger portion would come from public auctions, rather than acquisitions in the secondary market, a trend that developers had increasingly adopted over the past two years as small players ran into liquidity issues and sold land.
“Some primary land prices have become more rational than secondary land,” he said.

No hay comentarios: