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"Amateurs" exit real estate amid tougher conditions

12-08-2011 11:37 BJT

By Wei Tian

BEIJING, Dec. 08 (Xinhuanet) -- More capital is being pulled out of the property market, reflecting tough financing conditions and tightening curbs on the sector, which could lead to the sale of 300 billion yuan ($47 billion) in assets, a report showed.

The latest wave of sales included Hainan Airlines Co Ltd, which transferred its 33 percent interest in an island developer and sold its stakes in other developers. The moves allowed the company to recoup 4.6 billion yuan.

China's fourth-largest white spirits group, Sichuan Swellfun Co Ltd, said that it would divest property assets worth 530 million yuan and deregister a subordinate developer, because of the "uncertainties in the property market". Real estate once contributed one-third of the distiller's annual revenue.

"The company will focus on its core business and will no longer set foot in the property market," Zhang Zongjun, secretary of the board, told the China Economic Times.

In sharp contrast to 2008, when businesses flocked into the booming property market, 16 listed companies whose core business is not real estate have this year reduced or withdrawn their assets allocated to property.

"If regulation of the property market continues for another three to six months, the total assets and equity sold just by those non-real estate enterprises may exceed 300 billion yuan," Zhang Dawei, head of Centaline Property Agency Ltd's research department, was quoted by Beijing Business Today as saying.

Zhang's scenario appears realistic as the government is sticking with its property curbs despite price declines.

Property prices fell for a third month in November, data from SouFun Holdings Ltd show. The figures show that 57 of the 100 cities tracked saw prices slide, including all 10 of the biggest cities.

Although the recent cut in banks' reserve requirement ratio signals an easier policy environment for next year, officials have repeatedly said that property curbs won't be lifted.

Even further restrictions are on the way, as Jia Kang, director of the Ministry of Finance's Fiscal Science Research Center, said that a trial property tax in Shanghai and Chongqing will eventually expand to other cities.

The ministry hasn't yet chosen the cities, but the overall direction has been set, Jia told the China Securities Journal, adding that declining transaction volumes and a leveling of prices have proved the success of the policy in both cities.

The shift away from the property market is mainly due to financing difficulties, because the financing details of listed companies involved in real estate must be submitted to the China Securities Regulatory Commission for approval, according to a Shanghai-based industry analyst who declined to be identified.

The exit of these "amateurs" might offer opportunities for companies that specialize in property development, as there will be less disorderly competition, the analyst said.

Editor:Zhang Hao |Source: Xinhua

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