Oct. 3 (Bloomberg) -- About half of China’s commercial real estate companies may be forced to stop operating in the next three to five years as the government tightens housing-market policies, according to Yifan Hu, Haitong International Research Ltd.’s head of research and chief economist.
There are about 20,000 businesses in the industry, Hu said in a Sept. 30 interview from Hong Kong. The Chinese government said in July that it will rein in residential prices in smaller cities after it raised down-payment requirements and mortgage rates earlier this year. Hu recommends buying shares of companies tied to the public-housing industry, such as cement producers, as policy makers focus on building affordable homes.
“The government will continue tightening housing policy,” said Hu. “They’re very concerned about the impact on slowing economic growth, so part of the solution will be to increase the supply and provide public housing.”
Property companies plunged last month amid concern that sales will weaken. Evergrande Real Estate Group Ltd., China’s second-biggest developer by sales, and Agile Property Holdings Ltd., which builds apartments and hotels, fell more than 49 percent in September. Property transactions in September dropped 13 percent from August, according to SouFun Holdings Ltd., China’s biggest real-estate website that tracks 20 cities.
Chinese developers face an “increasingly severe” credit outlook, which may force them to cut prices and turn to costlier funding sources as sales weaken, Standard & Poor’s said on Sept. 27.
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