Business / Industries

Property construction still rising - but so is caution

By Hu Yuanyuan (China Daily) Updated: 2014-02-07 14:08

Chinese developers are still continuing to build, but sentiment has deteriorated because of tighter financing and policy uncertainty, research from Standard Chartered showed.

The latest Standard Chartered Developers Sentiment Index has moderated from its mid-2013 peak but still looks good, experts say.

"This indicates a still-growing market that has lost some of the momentum of the first half of 2013," said Stephen Green, an economist with Standard Chartered.

The index was based on surveying 30 developers in second- and third-tier cities around the country. The survey was carried out between November and December 2013.

It revealed a market still clearly in growth mode, but one where sentiment has deteriorated. Land sales have rebounded, construction continues to grow, and developers generally remain optimistic. However, rising prices, still-high inventory levels and increased policy uncertainty are gray clouds on the horizon.

"Such a situation is definitely more obvious in second- and third-tier cities, where supply has been sufficient," said Nie Meisheng, former head of the China Real Estate Chamber of Commerce. "But the risks in the first-tier cities, such as Beijing and Shanghai, remain low."

The month-on-month increase in 100 cities monitored by China Index Academy narrowed further to 0.63 percent in January of 2014, down 0.07 percentage point from December, according to the Beijing-based real estate research institute.

Among the 100 cities, 62 saw prices increase in January, compared with 68 in December, the academy said.

Developers' appetite for land still appears to be picking up, according to the survey. A total of 18 respondents believed their peers had a bigger appetite for land in the fourth quarter than the third quarter, up from 15 in the previous survey. And 16 said they intended to buy land in the next three to six months. The other respondents said they were concerned about government policy or believed land prices were already too high.

Moreover, developers surveyed expect land prices to continue to rise in the next one to two quarters. A total of 13 respondents said they expected price rises of up to 10 percent, while 11 see even bigger increases.

Developers' financing conditions, however, appear to be getting tighter. A record high 12 respondents said they had heard of cases of developers having problems paying for land. More than half of respondents reported having seen large, cash-rich developers buy land from distressed smaller firms.

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