Too Many Developers In China

Too many firms are involved in real estate. Some buyers of land are only looking for a place to park easy money, but others are buying to stay in business.

SCMP: Land kings, developers rake in the moolah as property market continues to sizzle in China
Though soaring land price are feeding the local governments’ pockets, it is squeezing developers’ margin and in some cases jeopardising a company’s survival, especially if developers fail to transfer land costs to consumers. Despite “stable” outlook for the industry, Moody’s has cut the outlook of 44 per cent of its rated property companies to “negative”, the highest ratio since 2012, citing developers’ expansion and rising leverage.

However, industry sources said developers have to, despite their grudges, foot the bill because without land reserves in first and second-tier cities, they are doom to be kicked out a few years later.

“We dare not touch the third and other smaller cities now (because of the downturn). To survive, we have to stack land in first and second-tier cities. It is an existential matter,” an executive with a major developer, who declined to be identified said.

“Adequate land reserves can relieve developers’ anxiety,” said Xie Yifeng, president of the Realty Association of Asia-Pacific Cities.

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