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Vanke president says property sector's golden era over

2014-05-29 13:48 Global Times Web Editor: Qin Dexing

The days of rapid growth in China's real estate sector are over, but the government's urbanization drive will continue to fuel demand for the next 15 years, the country's biggest residential property developer China Vanke Co said.

After climbing at double-digit rates through most of last year, home prices in China started cooling in late 2013, with the annual growth in average new home prices slowing to an 11-month low in April as a sustained campaign to clamp down on speculative investment and easy credit gained traction.

Vanke president Yu Liang said the slowdown heralded the end of the golden era for Chinese real estate, but said the outlook remained healthy.

"The white silver era has just begun," Yu told reporters at its research and development center in Dongguan in South China's Guangdong Province this week.

"The industry is now after quality and service and back to real demand...The industry was worth 8.1 trillion yuan ($1.30 trillion) last year, even growing at a single-digit rate, it's still large enough for us."

His comments came nearly a week after ratings agency Moody's lowered its outlook for China's property sector and forecast flat to 5 percent yearly growth over the next 12 months, compared to 26.6 percent growth at the end of 2013.

Yu said he believed government measures to curb speculation in the property sector had worked and prices were now more sustainable.

"I don't agree there's a bubble. Since the tightening measures in 2008, financial leverage of developers and individual investors has dropped significantly," Yu said.

Analysts said the latest land transaction prices have shown that the market is becoming more rational.

"Land sales in first-tier cities weakened in April as housing prices softened. It's important for developers to time and source the land purchase better because land cost is a big factor to determine margins," said Hong Kong-based analyst Karen Kwan.

Kwan said developers in April were bidding on average 40 percent higher than the asking price at land auctions, compared to 80-100 percent above opening bids last year. Transaction prices in April were also 1 percentage point lower than the previous month.

She said data also showed that developers had been delaying some new housing projects so she expected less oversupply in the fourth quarter.

New housing starts in the first quarter fell 25.2 percent compared to a year ago, sparking concerns that a sharp drop in construction activity and falling prices would weigh on economic growth in the world's second-largest economy.

Yu's comments came just days after the chairman of SOHO China sounded an alarm over the real estate sector.

"I am not upbeat about the residential market. I think China's real estate is like the Titanic and it will soon hit an iceberg up front," local media quoted Soho China chairman Pan Shiyi as telling a financial forum last week.

China Vanke also aims to get listed in the second half of June, Yu said.

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