Housing policy hits furniture market

The tightened residential property purchasing policy in China has had a negative effect on home products companies. Experts say companies need to pay more attention on improving quality if they want to improve their development.

Figures from central authorities suggest that property sales slowed in 2011 after the government announced more measures to cool the overheating real estate market.

The National Bureau of Statistics said that a total of 1.1 billion square meters of property were sold in 2011, a year-on-year increase of 4.9 percent. However, the growth rate for the period between 2009 and 2010 was 10.6 percent.

For many home products manufacturers and retailers, it might not be that easy to generate good financial results in the future in China.

Some companies are so pessimistic about the Chinese market that they have quit the business in large cities after the government tightened its housing policy. Fortune Global 500 company Saint-Gobain SA shut down all its seven home decoration shops in Shanghai in 2011 to avoid losses.

"Property trading is the main power that drives the expansion of home products companies. The tightened policy means there will be less demand for new home decoration, so it will have a negative effect on some home products companies," said Xue Shenwen, an analyst with CIC Consulting.

Although there might be a downturn in the home products retailing industry, experts are still positive about the development of the industry. Some said business opportunities exist in smaller cities that do not have tightened policies.

"Many people who already have a home may suspend any further property purchasing plans because of the limit on the number they can buy but some may try to redecorate or refurbish their existing property, so there will still be development opportunities for home products businesses," said Xue.

Xue said it is important for home products producers and retailers to improve their quality. For many Chinese companies, it has become essential to build their brand awareness.

"People who want to enjoy a quality life prefer to buy imported products or foreign brands. It is also a way for them to show their social status," said Xue.