Lean times ahead for developers
(China Daily)
Updated: 2006-07-26 08:26
Since the beginning, China's property boom has been largely fuelled by easy
credit and low interest rates on repayments.
The latest central bank
figures show outstanding loans by all banks to the property sector totalled 2.77
trillion yuan (US$346 billion) at the end of 2005, up 16 per cent from a year
earlier.
But the ready supply of credit is set to end. Steps have already
been taken to curtail lending to property developers.
"For bankers and
(real estate) developers the honeymoon is over," says Zhang Tao, a senior
analyst at Centaline. "It is becoming harder and harder for property developers
to secure bank loans."
Finance industry sources said some banks,
including Minsheng Banking Corp, are even considering a moratorium on property
development loans. Meanwhile, all lenders are said to have tightened credit
policies for lending to property developers.
"A lot of property
developers aren't going to be getting any fresh loans from their bankers in the
coming months," predicted Wang Shujuan, a senior analyst at Shanghai
stockbrokers Haitong Securities. "They will have to adjust to the lean times
ahead," he added.
Michael Hart, director of China research at Jones Lang
LaSalle, an international real estate agent, said he expects to see extensive
consolidation of the property market in all China's major cities. Many small to
medium-sized property developers will be forced to sell off at least some of
their land holdings to finance on-going projects and service debts, he
predicted. In Hart's view, a more mature market with less imbalance in supply
and demand should emerge as a result of the consolidation.
Lina Wong,
managing director of Colliers International (East China), a unit of the
multinational real estate agency, also expects to see casualties among the small
to medium-sized property developers. A new rule shortening the time allowed
between purchasing land and developing it, will force many cash-strapped
developers to sell up to larger developers, she predicted.
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