“It was them! They caused our profits to drop!”
In the latest sign of the pressures that China’s restrictions on residential real estate are putting on the nation’s property developers, SOHO China CEO Zhang Xin now contends that the greatest threat to the nation’s development comes from government policies.
In an interview with Reuters on Thursday, Zhang Xin contended that the residential property market across China has been “frozen” by government controls. In the discussion, the co-founder of developer SOHO China warned that risks generated by government policy, ostensibly meaning the restrictions that the government has put in place to dampen speculation in the housing market, pose the greatest threat to China’s economy.
Zhang was speaking to reporters following the company’s latest earnings report on Wednesday, where SOHO China reported a profit of RMB 1.42 billion for 2011, down 60 percent compared with the previous year, and below an analyst forecast of RMB 1.65 billion.
Zhang’s point of view on the economy is in marked contrast with the central government’s current focus, as Premier Wen Jiabao repeated on Wednesday that easing the current restrictions on housing in China “would cause chaos in the property market.” The government’s current line is that while rates have started to fall, residential real estate prices are still, according to Wen, “far from a reasonable level.”
Although SOHO’s Zhang had predicted to foreign journalists last September that the government’s current housing policies would be repealed within six months, she now admits that she cannot foresee when home-purchase restrictions will ease.
Despite the company’s current focus on office and retail real estate projects, SOHO clearly has not lost its taste for the residential deals which helped build it into one of China’s largest property developers, and made Zhang Xin and her husband/co-founder Pan Shiyi among China’s richest billionaires according to Forbes list of the 400 richest people in China. Zhang who made her fortune selling apartments and villas, believes that the government’s policies are misguided.
“There is no bubble,” Zhang said. “Very soon we will have a shortage of supply. This year and next year there is very little.”
[…] “We don’t believe that all of these austerity measures will be lifted within the next 12-18 months, until the new leaders are coming on stage,” Lee noted. This point of view echoes the more pessimistic tone recently heard from other developers, including SOHO China’s previously bullish CEO Zhang Xin. […]