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China's land supply measures to have mixed effect on developers: report

Xinhua, April 13, 2017 Adjust font size:

China's latest land supply measures will have mixed implications for property developers, according to a Moody's report.

The Ministry of Housing and Urban-Rural Development and Ministry of Land and Resources announced measures that cities with less than a year's supply of housing inventory should increase the amount of residential land for sale, and cities with more than three year's supply should suspend residential land sales.

The ministries also said that cities and counties with more

than 1 million inhabitants should formulate three-year (2017-2019) and

five-year (2017-2021) plans for the supply of housing land and make

plans public by the end of June.

"We believe that housing price growth will slow in cities where land

supply will increase, a credit negative for developers that purchased

land at high prices during the past 12 months with the expectation that

housing prices will continue to surge," said Chris Wong, a Moody's analyst,in a report.

Wong said this slowdown would pressure gross margins for those developers, while developers operating in cities with large housing inventories -- mainly lower-tier cities -- would benefit as the measures would restrict new supply in those cities.

This situation will give developers a better idea of land supply and

should help them manage their expectations on land availability and

prices, and subsequently help them manage their land acquisition plans, said the report.

The report said that it remained to be seen if the new measures would materially increase land supply within the next six to 12 months in high-tier cities that have less than six months of inventory, given the limited supply of land suitable for development and the relatively long time frame for redeveloping shantytowns.

The move is among a slew of measures the Chinese government has implemented since late September 2016 to cool fast growth in housing prices, including restrictions on home purchases and increased minimum down-payment requirements. Endit