Agile halts land purchases and slows building
Citing an unfriendly market, Guangdong developer expects to scale back operations in next three months
Bloomberg and Yvonne Liu
Nov 26, 2011
Agile Property Holdings (SEHK: 3383), a mainland developer based in Guangdong, suspended land acquisitions and slowed construction work on some projects because of poor market conditions.
"We have put a full stop on land purchases," Alex Liu, vice-president of Agile Property, told Bloomberg News. "We'll stop for at least the next three months." He added that the company will assess the situation again after the Lunar New Year.
It would also stop or reduce the scale of some of its ongoing projects to lower its expenditure on construction, he said.
Agile currently owns a land bank of 32 million square metres. The company bought four sites with a total gross floor area of 609,000 square metres for 1.5 billion yuan (HK$1.9 billion) in the first half of the year.
Research by property agency Weiye Woaiwojia has reported that the top-10 developers with the highest property sales spent more than 66 billion yuan in land acquisitions from January to October, 42 per cent less than a year earlier.
These include China Vanke, Poly Real Estate, China Overseas Holdings, Evergrande Real Estate, Greenland Group, Greentown, Country Garden Holdings, Longfor Group, Agile and Guangzhou R&F Properties.
"During a tight market, you need to sell for cash flow, and when the market is hot, you sell for profit," Liu said.
"Right now we're selling some leftovers from some projects at reduced prices, but the ones that we sold earlier have already given the projects very good return."
Agile is aiming to build up its cash reserves so it can begin buying land at discounted prices after winter, said Liu.
"But that won't happen soon," he added. "It will have to wait at least until home transactions pick up first."
The developer has set a target of generating 37 billion yuan from property sales this year.
"There'll be some difficulties for us to meet that target at the current market conditions," Liu said, declining to give a revised sales target.
The developer has expanded to cities outside Guangdong province. Liu said it planned to build a resort project in Yunnan, with an initial investment of 1.5 billion to 2 billion yuan.
Mainland property sales dropped sharply this year because of a series of cooling measures imposed by the government. Developers began to cut their asking prices on new projects to lure buyers in recent months.
Research by Home Link Estate Agency indicated there are more than 20 new projects in 10 major cities in which developers promised buyers that they would be compensated or the units would be bought back at the original cost if prices were cut later, the Beijing Morning Post reported.
yvonne.liu@scmp.com