China May Toughen Property Curbs, No Chance of Easing, Deutsche Bank Says

China may strengthen existing measures targeting the nation’s real estate market and speculation that the government will relax such policies has “vanished,” according to Deutsche Bank AG.

Investors should seek property companies that can adapt to the government’s policies, analysts led by Tony Tsang wrote in a report today. They favor developers that have greater exposure to so-called second- and third-tier cities that are “healthier” and to prime-location commercial buildings in the largest cities.

The 18 developers on the MSCI China Real Estate Index have dropped an average 12 percent this year after the government introduced measures that ranged from a ban on some mortgages and higher down-payments. The declines are almost three times the 4.3 percent retreat in the MSCI China Index, which tracks mostly Hong Kong-traded Chinese companies.

“We expect the current government policy environment to continue for a longer period of time,” the analysts wrote. Recent reports by local media “on property market tightening reaffirmed our view that policy relaxation is unlikely without more meaningful price decreases,” they said.

The China Banking Regulatory Commission will strictly enforce property policies and work to curb real-estate speculation, the Shanghai Securities News said yesterday, citing Ye Yangfei, deputy head of the regulator’s statistics department.

Curbing Sepculation

Vice Premier Li Keqiang urged local officials to further consolidate the results of the government’s curbs on speculation and to increase housing supply, according to an Aug. 21 statement on the government’s website.

Property prices in 70 major cities across China climbed 10.3 percent in July from a year earlier, the statistics bureau’s newspaper said on Aug. 10. The value of sales fell 19.3 percent from a year earlier.

China Vanke Co., the largest listed Chinese developer by market value, rose 1.2 percent in Shenzhen trading after the National Business Daily reported the company made more than 10 billion yuan in apartment sales last month. The company is among Deutsche Bank’s top picks in property, according to the report.

The brokerage also favors China Resources Land Ltd., Hang Lung Properties Ltd., Renhe Commercial Holdings Co., Minmetals Land Ltd. and KWG Property Holding Ltd.

To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net

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