The real state of real estate

Updated: 2013-04-12 13:43

By Zhu Jin (China Daily)

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In the first half of 2012 when market activities declined to maintain the sales momentum, many top developers reduced prices to attract buyers. China Merchants Property, for example, reduced its prices by 10 percent nationwide from March to May 2012. But many smaller developers couldn't afford to do so because of their reliance on sales for funds. The top developers have more financing channels and can afford to offer discounts and adopt a long-term strategy.

But even as the government regulations start to bite, it is clear that the leading developers have already absorbed the harsher regulatory climate and are focusing more on long-term strategy, such as how to connect with the government's goal of higher quality urbanization and building an ecological society.

The overriding concern for medium and small developers, on the other hand, is the effect specific policies will have on their immediate operations. The wide gap between the range of their visions shows why the government shake-up is necessary to help stabilize the market.

Now that profit margins in the domestic market are shrinking, many of the country's biggest developers are exploring overseas markets. Greenland Group, for example, is developing projects in South Korea and Australia. And Vanke has set its sights on becoming an international company in the next 10 years.

If the government extends the property tax, currently being trailed in Shanghai and Chongqing, and tightens the monetary policy further, as it has threatened to do if housing prices continue to rise, the market will become more favorable for the big developers as sales decline.

But while this will probably cause a drop in realty construction and slow down China's overall economic growth, at the same time it will remove some of the uncertainties that have accompanied the growing property bubble and be beneficial for the national economy in the long run.

The author is a reporter with China Daily.

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