Vanke Says Backlog of Unsold Homes Will Stifle Recovery

Government moves to spur lending have made given many observers hope for a recovery in the nation’s real estate market next year, but China’s biggest property developer remains unconvinced.

Speaking to the press in Hong Kong over the weekend, Yu Liang, CEO of China Vanke voiced concerns about the impact of excess inventories of unsold homes on the industry, especially outside of the biggest cities.

“Cities such as Beijing and Shanghai may be doing well, but many cities are facing great inventory pressure,” Yu was quoted as saying by Reuters.

Unsold Home Supply at Record Levels

The Vanke executive told the media that nationwide there is now a 13 month supply of unsold housing inventory, which will make it difficult for developers to raise prices anytime soon.

According to figures released by the National Bureau of Statistics last week, China now has 597.95 million square metres of housing available for sale. The backlog of unsold homes is a new record, and is up by 15.56 million square metres since the end of October.

Of course, much of this new supply comes from Vanke itself, which released 44 new projects onto the market last month. In total the Shenzhen-based company launched more than 3 million square metres of new space nationwide last month.

With China’s real estate prices sliding downhill for the last seven months, many developers had held back new projects from the market in the hopes that demand might recover, particularly in October and November when sales are typically strongest.

Vanke Sees Developers Squeezed by Land Prices

In his remarks Yu also continued to voice concern over market conditions that may be putting ever greater pressure on China’s real estate companies.

“Home prices are not going up but land prices are, making developers hesitate to purchase land because we may not make money,” Yu was quoted as saying.

In May this year the second-ranked official at Vanke, while acknowledging that developers could still make money, had predicted that the ranks of home builders in China would be thinned by some 75,000 companies as the industry left its golden age.

China Home Builder Branching Out into New Areas

During the last two years, Vanke has already shown a shift in direction to avoid some of the hazards of the industry slowdown.

The Shenzhen-based developer has moved towards an “asset-light” strategy by investing together with private equity firms such as Carlyle and Blackstone. The company has also shifted away from its traditional focus on mid-range housing in China to take on projects in the US and in other real estate sectors such as office and industrial projects.