China’s Home Market Should Retreat After Curbs, Hang Lung’s Chairman Says

China’s home market, bracing for the most severe slowdown in three years, should retreat after “extraordinarily tough” measures by the government, said Ronnie Chan, chairman of Hang Lung Properties Ltd. (101)

Home purchase limits and tighter mortgage requirements imposed by the government “just choked the market,” Chan, whose Hong Kong-based developer is investing more than HK$40 billion ($5.2 billion) building shopping malls in China, said in a Bloomberg Television interview today.

China’s December home prices posted their worst performance last year, with only two of the 70 cities tracked by the government posting gains. Prices in 52 of 70 cities monitored declined from the previous month, the statistics bureau said this week, while those in the nation’s four major cities of Shanghai, Beijing, Shenzhen and Guangzhou slid for a third month.

The nation’s home transactions will fall 10 percent this year, according to Daiwa Securities Capital Markets, while UBS AG says the curbs may boost supply to the highest in a decade.

Developers also slowed home sales toward the end of 2011 in anticipation of a worsening property market. Contract sales, or sales booked before apartments are completed, dropped 30 percent last month at China Vanke Co. (200002), as the country’s biggest developer by market value offered fewer homes from November. Evergrande Real Estate Group Ltd., the second-biggest Chinese developer by revenue, said sales in November and December were the lowest for the year.

‘I’d be Cautious’

Chan, whose company has been developing real estate in China since early 1990s, said he’s “not sure” when the government will start easing its property measures.

“If I were them, I’d be cautious too,” he said. The measures “have loosened a bit. But on the other hand, what assurance will they have that prices will come down on a sustainable basis.”

Hang Lung, which has opened four shopping malls in the Chinese cities of Shanghai, Jinan and Shenyang, will complete at least one property in the country every year until at least 2015.

Shares of the company, which reported a 29 percent growth in underlying profit for the second-half of 2011 on improving margins at its China shopping malls, gained 9.7 percent yesterday, the biggest increase since April, 2009, following the earnings. The stock dropped 1.1 percent to HK$26.20 as of 9:38 a.m. in Hong Kong.

The shares lost 39 percent in 2011, the worst performer in the seven-member Hang Seng Property Index, on investor concerns about rising competition in China’s retail property market.

Performance for Palace 66, the Shenyang shopping mall it opened in 2010, is improving, Chan said.

The country’s fourth-quarter economic growth of 8.9 percent was “okay for China,” Chan said, adding he isn’t counting on a hard landing for the country.

To contact the reporters on this story: Kelvin Wong in Hong Kong at kwong40@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net.

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