Translated from Sinafinance by Andrew Vanburen
On Tuesday, listed Chinese developers bucked the benchmark slump and took a slight turn for the better.
But investors should not jump to the conclusion that the property slump is poised for a rebound.
Market watchers generally agree that the recent macroeconomic adjustments -- this time taking the form of looser credit following a ratcheting down of the reserve requirement ratio (RRR) -- have given a small burst of vitality to the moribund real estate sector.
However, they also concur that the massive land bank grab of 2010 in which developers added plots and developments with reckless abandon has now resulted in serious oversupply, amid which prospective homebuyers more interested in “kicking the tires” all translates into a very long and slow winter for the sector.
Currently, buyer interest in property and construction continues to surprise on the downside, and it will be quite some time before the country’s real estate sector emerges from these long shadows.
As of the final bell on Tuesday, property counters had added 0.66% on the day, with some 2.64 bln yuan flowing into listed A-share real estate firms which won the sector top honors for the day in this category.
Among the A-share developers, Guangzhou Pearl River Industrial Development (SHA: 600684) shot up 5.69% and Fujian Start Group Co Ltd (SHA: 600734) added 5.15%, while stadium manager China Sports Industry Group Co Ltd
"The current real estate sector valuation average is flirting with nadirs not seen since 2008, and is one of the worst performers of late relative to the broader cross-industry Shanghai Composite Index.
“Due to November’s bottoming out of the industry, it is only natural to see signs of technical rebounds the following month, but these are nothing to get too overly excited about,” said another industry watcher.
Another interested party also echoed the general sentiment of indifference or ambivalence toward the sector at this point in time.
“Now is not the bottom of the curve for property, I’m afraid to say. So there is little point in jumping in now in a big way because I see it perhaps going even lower, or at the very least hovering at this limp state for quite some time,” said a private equity fund manager in Shanghai.
There doesn’t seem to be much enthusiasm at all now for a sector which has – off and on – been the darling of both the Mainland and Hong Kong capital markets for the past several years.
But as the temperatures drop, and those of us lucky enough to be safely and warmly ensconced in our self-owned homes (or affordable apartments), we would do well to remember that there are many not so fortunate.
And the coming winter for the real estate sector in general is bound to be a long and cold season.
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