One-third of realty developers see slower growth

Nearly one-third of some 90 property developers in China, including the Gemdale Group and Huayuan Property Co, reported a slower year-on-year growth of net profit from January to September this year, news portal qq.com reported Tuesday.

While some market watchers worry that this might indicate that the potential of China's property market has reached a ceiling, analysts contacted by the Global Times said the market remains hot and still has significant space to grow.

Gemdale Group, a leading real estate company that mainly develops commercial residential properties, reported Monday that its net profit from January to September has dropped by 22.2 percent from the same period last year to 716.4 million yuan ($117.7 million).

Huayuan Property Co, headed by China's real estate tycoon Ren Zhiqiang, said Monday that its net earning in the first three quarters reached 312 million yuan, down by 11.34 percent from last year.

According to news portal qq.com, nearly one-third of 90 listed real estate companies have seen slower net profit increase compared with last year.

For example, Tianjin Jinbin Development Co, which develops both commercial and residential buildings, made a loss of 163.5 million yuan in the first three quarters this year, while it made a total profit of 68 million yuan last year.

Chen Guoqiang, deputy director of the China Real Estate Society, told the Global Times Tuesday that the companies' narrowing profit growth does not indicate that China's property market is in trouble.

"Real estate developers' financial reports record the deals and projects which the companies started about a year ago and have just completed in the current quarter. So they do not indicate the companies' current sales and operation performance," Chen said.

Gemdale said in its financial report that it has sold 2.49 million square meters of properties from January to September, up 30.2 percent from last year. The company achieved sales revenue of 31.9 billion yuan in the first three quarters, achieving a 42.8 percent year-on-year growth, the report said.

Hui Jianqiang, research director with real estate information provider Beijing Zhongfangyanxie Technology Service, said that the rising land price, labor costs and material costs are other reasons that have caused the property companies' profits to drop.

Liu Yuan, a senior research manager at Centaline China Real Estate, told the Global Times Tuesday that there is still vigorous demand for both residential and commercial properties in the first- and second-tier cities.

According to Beijing Statistical Information Net, property developers have invested 120 billion yuan in residential properties in the first nine months this year, up 7.6 percent from last year. And the companies have invested 39.8 billion yuan in commercial properties, achieving a 32.7 percent year-on-year growth.

Hui agreed with Liu, adding that the demand in developed cities is "far from being met," adding that the property market in third- and fourth-tier cities, will face oversupply.

"Real estate companies should either strictly focus on one area of specialization or well diversify themselves in the financial market or cultural industries to hedge against risks in the real estate market," Hui said.