Ongoing urbanization one factor in developer's property market optimism

Shui On Land Ltd, a mainland-based developer known for its flagship Xintiandi luxury projects, plans to accelerate its pace of project development as it remains bullish about the outlook for the property market despite fresh tightening measures by the central government to prevent bubbles from forming.

The group has adopted a new three-year plan for 2009-2012, with a key feature of accelerating project development, chairman Vincent Lo told a press briefing Thursday after the developer reported a 49 percent increase in net profit to 2.67 billion yuan for 2009 due mainly to stronger property sales.

Shui On Land's operation will see little impact from the new tightening measures as it mainly develops and sells high-end properties to buyers who are cash-rich. "Around one-third of our buyers settle their purchases with full cash," he revealed.

Based on the three-year plan, the developer expects to complete projects with total gross floor area (GFA) of 390,000 square meters this year, 606,000 square meters next year and at least 1.0 million square meters in 2012. It will continue to increase its completed GFA consistently each year thereafter.

"We will accelerate our pace of project development in step with the government's policy. We don't want to be suspected of engaging in land hoarding," Lo said, emphasizing that the group has never been blacklisted as a land hoarder.

However, what is more important is that the developer wants to capitalize on the current property boom by converting more of its land bank of 13.0 million square meters into saleable projects.

"We are accelerating the pace of project development as we don't want to miss the good opportunities provided by the booming market. If we miss the opportunities, it will not serve the interest of the group," Lo said.

The developer remains bullish about the outlook for the property market despite further measures by the central government to curb speculative activities in the real estate market. "We support the government's moves as we dislike speculative activities," Lo said, commenting on the central government's new initiatives targeting the property market.

The measures announced Thursday by the State Council include the requirement of at least a 50-percent down payment for flat purchases by non-occupier buyers and higher mortgage rates for them.

The measures could cause a decline in sales volume in the short term but won't trigger a sell-off in the market as the demand is quite inelastic, Lo believes.

"I remain pretty confident about the prospects for the mainland property market despite the tightening measures by the government, which shall help maintain a healthy real estate market in the long term," he said, reiterating that he sees no bubble in the market.

He cited the continuously strong growth in the economy and incomes of individuals, the scarcity of land resource and the country's on-going urbanization process that see millions of people transferring to urban areas from rural areas, for his optimism about the property market.

China Daily

(HK Edition 04/16/2010 page3)