Property firms see drop in share prices

China's four leading property firms saw a drop in their share prices Wednesday, after they revealed weakening performance in their half-year reports.

Shanghai-listed Gemdale Co's shares closed down 2.71 percent at 5.03 yuan ($0.79), after it revealed that its revenue rose 25.5 percent year-on-year to 6.47 billion yuan during the first half, but that its net profit had only increased 5.1 percent compared with last year.

Poly Real Estate's shares fell 3.46 percent, China Merchants' shares were down 2.14 percent and those of China Vanke Co fell 2.16 percent Wednesday.

The total first-half revenue of the four enterprises amounted to 67.4 billion yuan, a 40 percent increase from last year, but the growth in their net profits was less than 200 million yuan, a 2 percent year-on-year rise.

Poly's net profit fell 12.13 percent year-on-year in the first half and China Merchants saw a 16.76 percent drop in net profit.

Tightened real estate policies nationwide that resulted in weakening demand is the major reason for reduced profitability for these property firms, Liu Yuan, research director at the Shanghai branch of Centaline China Real Estate, told the Global Times Wednesday.

"Their climbing revenue but small profit growth are caused by increased financing costs. Many developers resorted to more costly bonds and trusts in order to raise funds and relieve their capital shortage after banks tightened credit for the property sector," Liu said.

Also, more homebuyers have been buying houses for their own residence due to the new home purchasing limits. So small and medium-sized homes have sold well, but high-end houses, which offer much higher profits, have seen lower sales, resulting in slowing growth in developers' profit margins, Liu noted.

He predicted that no further wide scale property curbs would be carried out, but reports of broader implementation of the property tax have increased market uncertainty.

Central China's Hunan and Hubei provinces are working on details of a property tax, said a report posted on the website of the Ministry of Land and Resources early Monday, but the report was removed from the website later in the day.

Hunan denied the report and Hubei Local Taxation Bureau said on its website Wednesday that it has not received any notice from the central government to impose the property tax. A report in Beijing-based Legal Mirror Tuesday said that the bureau is preparing detailed rules for the tax, citing the bureau's spokesperson Xu Zhengyun.

Meanwhile, the market situation is improving for real estate developers as some local governments have slightly loosened their property policies to help boost property sales, Liu said.

But developers still face capital pressure and have an expanded inventory of apartments, said Chen Guoqiang, deputy director of the China Real Estate Society.

It is impossible for the central government to relax the property control policies and no strong rebound in the market is likely, Chen said.

"Developers must take the initiative to adapt to market changes in order to survive, instead of counting on favorable policies," Liu noted.

The State Council expressed satisfaction with the effects of real estate curbs in most cities early this month, but new home prices in 50 out of 70 major cities rose in July month-on-month, up from 25 cities that saw an increase in June, according to the National Bureau of Statistics Saturday.