China - Housing 01 (May 08 - May 10)

[winston]

Beijing taken to task over real estate sector
Kathy Wang

Government interference in the property market has made house pricing estimation difficult, according to one of China's real estate pioneers.

"We see government's recent policy changes and interference as a type of a demarketization measure, which makes price estimation really difficult," Feng Lun, chairman of Vantone Real Estate, told a Sina.com webcast interview.

Feng said investors and homebuyers are unwilling to jump into a property market where long-term policy guidelines are so vague.

Feng, known as a leading light in the real estate industry, said this year Vantone would tap the high- end luxury residential and commercial property sector, where the government has less control.

" The best thing Beijing should do [in terms of the housing market] is not to do anything " Credit Suisse chief economist Dong Tao said earlier.

Tao said that although Beijing strives to regulate the market and tries not to let property prices fall too drastically, the central government is losing control slightly and has already started to let local governments introduce more flexible policies.

Feng said property developers are facing challenges because their taxes are higher than their profits. He said developers may have to shift to commercial real estate to achieve better profits this year.

Feng said "government should safeguard the social housing sector and leave the other sectors for natural market correction."

Beijing has introduced tax incentives to stimulate demand. In the fourth quarter of last year, it cut the deed tax from 1.5 to 1 percent for first-time buyers of housing units smaller than 90 square meters. It also scrapped the stamp duty and land appreciation tax on individual housing transactions.

In its latest move, Beijing gave buyers of second homes the same preferential mortgage terms as first- time buyers.

[winston]

DJ MARKET TALK: Fitch: China Property Sector Outlook L/T Positive

1102 [Dow Jones] Outlook on China residential property sector remains negative in 2009 because of near-term economic slowdown, short-term oversupply, but medium- to long-term picture "rather positive," Fitch rating says in report.

Current downturn to encourage industry consolidation, with large, well-run property developers to gain larger market share, while smaller ones with poor funding access forced out, Fitch says.

"Given that margins are still quite decent, many of the homebuilders can take the hit and remain profitable," Fitch says. "As for the Fitch-rated entities, the current rating level has already factored in a moderate downside scenario - and therefore near-term rating actions are unlikely."

[winston]

DJ MARKET TALK: Buy China Developers On Likely Rate Cut -Fund Mgr

1500 [Dow Jones] Investors can buy China property stocks to bet on favorable Beijing policies in short term, says local fund manager. Expectations strong for China to launch more stimulus measures in short term, which may include an interest rate cut, with property sector one of most direct beneficiaries of any such cut.

Also, sector recently retreated significantly, pressured by raft of profit warnings. Blue-chip developer China Overseas (0688.HK) lags, down 1.4% at HK$10.20 vs HSI +0.3%, but other big names up: R&F Properties (2777.HK) +6.2% at HK$6.40, Hopson Development (0754.HK) +8.4% at HK$4.50, Greentown China (3900.HK) +2.3% at HK$2.67 - these three have high gearing, would benefit more from potential rate cut

[winston]

DJ MARKET TALK: Most China Ppty Shrs Up; But View Challenging-DBS

1139 [Dow Jones] HK-listed China property stocks mostly higher, on hopes for potential rate cut in China over weekend, but overall outlook remains cautious. DBS says despite various stimulus plans in place, pickup in demand and property prices post-1Q (slow season) remains challenging because of weakening economy, shrinking wealth and high inventories.

"Most of the cities we track still require 12 to 30 months to absorb current inventories," says DBS. Tips sales volume to pick up gradually as developers push new launches to March/April, but intensifying competition to continue to weigh on prices, implying further margin squeeze for developers.

Keeps Neutral on sector; prefers China Overseas (0688.HK), SOHO China (0410.HK) and China Resources Land (1109.HK) with their strong execution capabilities and strong financial position. China Overseas +1.8% at HK$10.18, SOHO China +1.9% at HK$2.69 and CRL +1.1% at HK$8.84

[winston]

China’s Property Stocks Advance on Tax Rebate Speculation By Chua Kong Ho

Feb. 10 (Bloomberg) -- China property stocks rose, led by China Vanke Co., Poly Real Estate Group Co. and Gemdale Corp., on speculation the industry will receive tax rebates and other incentives from the government.

Vanke, the country’s largest real-estate developer, gained 3.8 percent to 8.20 yuan as of 10:31 a.m. local time in Shenzhen trading. Poly Real Estate added 3.3 percent to 19.05 yuan in Shanghai, while Gemdale advanced 4.6 percent to 9.09 yuan.

A stimulus plan for China’s real estate industry has been submitted to the nation’s cabinet for approval, the Securities Daily reported, citing Nie Meisheng, former head of Real Estate Industrialization under the Ministry of Construction. The parliament may enact the plan in March, which will give domestic developers credit and development support, the newspaper said.

Property stocks rose “in anticipation of tax rebates for the sector,” said Gabriel Gondard, Shanghai-based deputy chief investment officer at Fortune SGAM Fund Management Co., which oversees about $7 billion. “China cannot afford to let this asset class collapse.”

The benchmark Shanghai Composite Index added 0.9 percent today, while the Shenzhen Composite Index gained 1.4 percent. Property stocks had the biggest percentage gain among the industry groups of both indexes.

[winston]

DJ MARKET TALK:2008 Pfts Will Differentiate China Developers-Citi

1103 [Dow Jones] Citigroup says China property developers will be differentiated by FY08 earnings delivery, which "will reflect their execution ability and earning visibility;" says China Overseas (0688.HK), CR Land (1109.HK), Sino-Ocean Land (3377.HK) stand out from peers, but FY08 consensus earnings estimates still too high for Country Garden (2007.HK), KWG (1813.HK), C C Land (1224.HK), Agile (3383.HK), Yanlord (Z25.SG), despite forecasts being cut significantly by most analysts over past 12 months.

Most mainland property stocks fall more than HSI's 3.5% decline in heavy profit-taking; Agile off 7.5% at HK$3.07, blue chip China Overseas relatively outperforms, down 2.2% at HK$10.50.

[winston]

DJ MARKET TALK: CS Tips CR Land As Top China Property Sector Pick

1209 [Dow Jones] STOCK CALL: Credit Suisse says more data points needed to confirm positive trend in China's major cities' property sales despite January's improvement vs comparable period in February 2008 given Chinese New Year holidays.

Says it's encouraging that most developers under coverage reported January sales increase as already factors in seasonal effect as Chinese New Year traditionally weakest sales period of year. Expects China's property prices to fall 10%-15% on-year in 2009 on high inventory levels, developers' stretched financials; tips sustainable volume rebound only in 2H09 on continuous improvement in affordability.

Tips CR Land (1109.HK) as top sector pick on strong execution ability as one of few developers achieving 2008 sales target, sound financials, strong earnings growth prospects; rates at Outperform, target HK$13.65.

Says also likes Shimao Property (0813.HK) due to inexpensive valuation; rates Outperform, target HK$7.40. CR Land up 1.3% at HK$7.98, Shimao down 1.3% at HK$4.60.

[winston]

REFILE-UPDATE 1-China considers steps to aid housing mkt -media

SHANGHAI, Feb 23 (Reuters) - China is considering a package of measures to provide long-term support for its residential housing market, including the scrapping of curbs on purchases of second homes, official media reported on Monday.

The China Securities Journal quoted an unnamed, authoritative source as saying the National Development and Reform Commission, the top economic planning agency, was now reviewing proposals submitted by the construction ministry.

The package would aim to increase demand for owners to improve their homes, cut tax costs for people buying and selling homes, and help low-income people buy homes, the source said.

There are also proposals for the government to buy a small amount of housing stock to help it prevent excessive price fluctuations, and for steps to ensure home buyers and developers receive ample long-term financing, the newspaper added.

Developers would be allowed to create real estate investment trusts (REITs) as soon as possible to bolster their funding, while rules restricting the amount of institutions' investment in property would be abolished or relaxed.

The newspaper did not say when the package might be introduced.

The Shanghai Securities News quoted Cheng Siwei, an influential former lawmaker, as saying the government had placed residential housing on its list of 10 major industries, which would receive policy assistance.

But it remains unclear what specific policies will result from this, partly because authorities are still debating whether a policy package should focus on the property market's current slump or its long-term development, the newspaper added.

Two government sources told Reuters on Monday that the State Council, or cabinet, did not plan to include the property sector in its list of industries to receive formal assistance packages.

Since last year the government has announced a range of steps to aid the real estate market.

In December it cut business and transaction taxes for real estate sales, and said it would let people buy second homes on the same preferential terms normally reserved for those buying first homes, if floor space per person were lower than the average for the city where the homeowner lived.

[winston]

Default risk seen rising at China developers

Some of China's largest real estate developers may be at risk of defaulting on their debt this year because of liquidity problems and a challenging environment, according to Standard & Poor's.

"If, as seems probable, the real estate market remains volatile with a low transaction volume and falling sales prices, we are likely to see more defaults," Bei Fu, an S&P credit analyst, wrote in the statement.

Home prices in China fell 0.9 percent in January, the second consecutive monthly slide and the longest losing streak since such data has been issued from August 2005. Property prices more than quadrupled in the five years through 2007 as urban incomes rose.

"We expect the developers' 2008 results to be weak and their financial performances in 2009 could be even worse," Fu wrote. She didn't identify which firms could default.

"China's real estate developers don't expect the property market to rebound until at least the second half of this year, as prices must fall further to attract more buyers," Goldman Sachs analysts Thomas Deng and Kinger Lau wrote in a report out on February 25. BLOOMBERG

[winston]

DJ MARKET TALK: China Ppty Stks Higher; Sales Rebound In Feb

1047 [Dow Jones] China real estate companies rise as property transaction volume rebounds strongly in February; China Vanke (000002.SZ) +3.2% at CNY8.18, Poly Real Estate Group (600048.SH) +3.0% at CNY21.00.

"In the long term, uncertainty still remains in most cities whether active trading will extend. But I believe they will continue to have a good trading volume in March," says Sun Jianping at Guotai Junan Securities.

February transaction volume in China's 30 large cities on aggregate up 50% vs January to 13.3 million square meters, according to real estate research firm China Index Academy