The golden age of China’s real estate market is over, according to the top of executive of China Vanke, but the industry should do just fine as it enters its “silver age.”
Yu Liang, the CEO of China’s biggest real estate developer by sales refused to hit the panic button in recent remarks to the press, despite the ongoing slide in property prices that recently caused the sale of Greentown China and had real estate tycoon Pan Shiyi sounding the alarm bells earlier this week.
While predicting that the majority of China’s property developers will cease to exist within the next 15 years, the senior real estate executive sees this coming through a natural evolution of the industry, rather than a sudden collapse.
“The tightening measures since 2008 have largely deleveraged the industry,” Yu was quoted as saying in the South China Morning Post, however, he indicated that for industry leaders such as Vanke, the more competitive environment might work to their advantage as the industry moves from the “golden age” and into the “silver age.”
No Need for Panic
Yu’s philosophical perspective on the current market stands at odds to the scenario painted earlier this week by Pan Shiyi, the chairman of Beijing-based commercial developer Soho China.
Speaking at a financial forum in Beijing, Pan said, “I think China’s property market is like the Titanic and it will soon hit an iceberg in front of it.”
Pan’s remarks followed soon after the owners of Hangzhou-based developer Greentown China sold off a controlling stake in their firm to Sunac Holdings, after their company ran into repeated financial difficulties in China’s increasingly competitive market.
Consolidating from 85,000 to 10,000 Developers
Yu pointed to Sunac’s acquisition of its stake in Greentown as the beginning of an industry consolidation that would see the real estate sector pare down from the more than 85,000 firms currently in the game to only 10,000 within 15 years time.
Like many analysts, Yu sees the current slowdown as an opportunity to acquire assets at a discount from weaker players who jumped in during the recent boom times. However, he didn’t necessarily see this happening through bankruptcies or hostile takeovers.
“It’s not going to be big fish eating small fish,” the SCMP quoted the real estate executive as saying. “It will more be in the form of co-operation rather than takeover.”
Ultimately, Yu predicts that within 15 years China will see 50 to 60 percent of the market dominated by the top 100 developers.
Not the First Time Vanke Has Spoken Out
Yu’s remarks are not the first time that Vanke executives have sounded a bearish note on the industry.
In comments at a private gathering in April which were later posted on the Internet , Vanke Vice Chairman Mao Daqing said that China’s market was saturated and that he saw no chance for further housing price increases unless the government moved to stimulate the economy.
Even as early as June last year, Vanke’s billionaire chairman, Wang Shi raised fears of a bubble in the country’s residential markets in an interview with the press, after having earlier remarked during a session of CBS’ 60 Minutes program in the US that China’s housing bubble could bring “disaster” to the country’s real estate market.