January 14, 2015 / 6:33 AM / 6 years ago

China housing inventories seen piling up in 2015 as supply grows

HONG KONG (Reuters) - Nine out of 12 listed Chinese developers surveyed by Reuters said they will launch more housing projects in 2015 as they strive to meet sales targets and boost market share - at the risk of adding to already-bloated inventories.

A man sits near apartment blocks in central Beijing, December 22, 2014. REUTERS/Jason Lee

“The market will be better than last year because of the macro environment’s support. There’s more confidence in the market,” said Ada Wong, vice-president of Guangzhou-based China Aoyuan Property Group (3883.HK).

“Home prices usually rise 3-5 percent annually, so we may see such a rebound in first and second-tier cities in 2015.”

China’s real estate market has been plagued by falling prices and high inventories in recent months, crimping demand in 40 economic sectors ranging from steel to cement to furniture, dragging on the country’s slowing economy.

Executives at nine of the 12 listed developers contacted by Reuters said they will increase new launches at levels ranging from single digits to more than 20 percent, while the remaining three said they had not yet confirmed their plans for 2015.

On Thursday, China’s fifth-largest developer, Evergrande Real Estate (3333.HK), said its contract sales target for 2015 is 150 billion yuan ($24 billion). To reach that goal - which is 36 percent higher than a year earlier - the company may well have to launch more new projects. Evergrande declined to comment when contacted by Reuters.

Listed developers have generally moved out of third- and fourth-tier cities, where supply accounts for up to 70 percent of the whole country.

“Inventories are high. We can’t raise prices until after the market digests them,” said the chief executive officer of a developer based in southern Guangdong province. “The sales went up but prices didn’t - it won’t be easy for us to raise prices.”

Nomura’s China economist, Hua Chang Chun expects home prices to ease further in 2015 as supply continues to rise.

“Most third to fourth-tier cities still have a big problem; they account for 60 to 70 percent of market share. If developers focus on top tiers their sales may still go up, but overall, sales won’t be very good,” Hua said.

Growth in real estate investment slowed to 11.9 percent in the first 11 months of 2014 - the slowest in more than five years. [ID:nLNNEC90SG]

Property investment growth will slow to around 8 percent this year, Nomura’s Hua forecast, from 20 percent in 2013 and 12 percent in 2014.China housing price data for December is due for release on Sunday.

Editing by Eric Meijer

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