Vanke chairman emphasizes the how real estate market is oversold

Yu Liang, chairman of Chinese real estate developer Vanke, said on Thursday that the current real estate market is clearly oversold and a complete overhaul of the market still needs a considerable amount of time.

Due to the prolonged sluggish in real estate sales, market sentiment has been affected, making it prone to overreactions, Yu said at the company's interim results announcement meeting in Shenzhen, Guangdong province.

Vanke's interim report released on Wednesday shows its operating revenue of 200.89 billion yuan ($27.56 billion), a decrease of 2.9 percent year-on-year, and its net profit dropped 19.4 percent to 9.87 billion yuan.

However, the company maintained a sound financial performance with net cash inflow from operating activities for 14 consecutive years. Meanwhile, its operation and service business maintained double-digit growth, with an 11.9 percent year-on-year increase in total operating revenue.

Yu said Vanke will continue to uphold the security bottom line, maintain unwavering confidence, and make every possible effort. He believes with the economy rebounding and expectations stabilizing, the market will return to a normal development level.

He mentioned how the new residential property construction area in the country declined by 25 percent from January to July this year and, at this decrease rate, the new construction area for this year is estimated to fall to only 660 million square meters – similar to the scale of 2006. If China's urbanization rate reaches 70 percent by 2030, with the urban population increasing to around 980 million people, he forecasted a future new construction of 1 to 1.2 billion square meters in the next 10 to 12 years will be reasonable.

In addition, he also found that new market opportunities and models are emerging. "Population will concentrate in cities that offer employment opportunities. In these cities, the population initially disperses to the suburbs and then gradually congregates towards the city center again."

Another trend is that residential housing used to primarily focus on meeting the rigid needs of first-time homebuyers, but in the future, the real estate emphasis in China will shift towards addressing the demand for improved housing, he said.

grace@chinadailyhk.com