China Property Enters Consolidation Period After ‘Golden Era’, Citi Says

Chinese developers entered an era where success depends on having high-quality properties with “strong recurring income” rather than a high-volume residential business model, Citigroup Inc. said.

Developers have to convince the market of their ability to sustain growth, maintain a healthy financial position, and weather policy and counter-cycle risks, analysts led by Oscar Choi wrote in a report dated yesterday.

China’s home prices fell for a fourth month in December after the government reiterated plans to maintain curbs that include higher down-payment and mortgage requirements, according to SouFun Holdings Ltd. (SFUN) Housing values dropped in 60 out of 100 cities tracked by the nation’s biggest real-estate website owner, including the 10 largest cities such as Shanghai and Beijing.

“The story has entered a new chapter,” the analysts wrote. China’s property market in September entered what will probably be a consolidation period of three to five years after a “golden era” in the past decade, they said.

Policies regulating home prices are no longer the only dominant factors affecting developers, the analysts wrote.

Retail and hotel properties would benefit from rising domestic consumption and travelers in the country, the analysts said, adding that offices is their “least preferred” commercial properties because of their “vulnerability to the uncertainties of the global economy.”

Sun Hung Kai Properties Ltd. (16) and Hang Lung Properties Ltd., (101) the biggest and third-biggest developers in Hong Kong, Shangri- La Asia Ltd., a Hong Kong-based hotel operator, China Resources Land Ltd. and Franshion Development Ltd., are the real estate companies with “leading fundamentals in the space,” they said.

The government has reiterated it won’t back away from real- estate industry curbs, while the financial center of Shanghai and the capital of Beijing are among Chinese cities that have said they will continue to impose home purchase restrictions this year.

To contact the reporter on this story: Kelvin Wong in Hong Kong at

To contact the editor responsible for this story: Andreea Papuc at

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