China's Property Stocks Decline; Citigroup Says Market at `Turning Point'
China’s property stocks fell to the lowest in more than a year after the Economic Observer said the State Council has approved a real-estate tax trial in four cities and Citigroup Inc. forecast prices may drop 20 percent.
China Vanke Co., the biggest developer, slid 2.6 percent to close at 7.90 yuan, extending its decline this year to 27 percent. A gauge of property stocks in the Shanghai Composite Index retreated 1.8 percent to its lowest since April 8, 2009.
The trial will start in Beijing, Chongqing, and Shenzhen and then in Shanghai following the World Expo, the report said, citing an unidentified person. A “turning point” in the China property market is “unavoidable,” Citigroup analysts Oscar Choi and Marco Sze wrote in a report today.
“Investors are worried about a worst-case scenario for property companies along with banks on the government’s crackdown,” said Wei Wei, an analyst at West China Securities Co. in Shanghai.
China has introduced “the most draconian” measures in the past week, according to Deutsche Bank AG’s Greater China chief economist Jun Ma, after earlier steps including raising the amount of bank reserves failed to prevent a record surge in property prices in March. Hedge fund manager James Chanos said this month China is “on a treadmill to hell” and that the real estate is a bubble that may burst as early as this year.
The property bubble could hurt social as well as financial stability and must be deflated if the country is to urbanize and develop a healthy economy, the China Securities Journal said in an editorial today.
The implementation of a property tax is “inevitable,” the only question is when and where, Michael Klibaner, head of research at Jones Lang LaSalle Inc., said in Shanghai today.
Citigroup analysts predicted home prices may fall as much as a fifth from current levels by the end of the year, as tightening measures and increased land supply take effect.
The southern city of Guangzhou had 804 cancellations for home purchases on April 19, the highest on record, China Business News reported today, citing the Guangzhou Municipal Land Resources and Housing Administrative Bureau.
The housing ministry vowed April 20 to punish developers that “artificially” create supply shortages and ordered builders not to take deposits for sales of uncompleted apartments without proper approval.
The central bank last week raised mortgage rates, increased down payments for home purchases and ordered banks to restrict loans for buyers of three or more homes. State-owned companies were ordered by the government in March to pull out of property development if it’s not their main business.
Demand for housing in China will withstand government bank lending curbs, and further declines in the nation’s property stocks may be an opportunity to buy the shares, Templeton Asset Management Ltd.’s Mark Mobius said this week.
Alpha Investment Partners Ltd., a unit of Singapore developer Keppel Land, is looking to invest in Chinese property as it bets on “real demand” to hold up, Managing Director Loh Chin Hua said in Singapore yesterday.
Shanghai New Huangpu Real Estate Co. slumped 4.7 percent to 13.11 yuan today, extending a loss this week to 21 percent. Greentown China Holdings, which develops villas, slid 2.4 percent to HK$8.47 in Hong Kong, a 12th day of declines.
To contact the Bloomberg News staff on this story: Chua Kong Ho in Shanghai at firstname.lastname@example.org