Property Firms' Profit and Sales Dive as Buyers Hold off

Two Shanghai-based real estate developers said Wednesday their revenue and profit fell in the first half of this year amid slack market sentiment and rising operational costs.

Uncertainties in the country's macroeconomic trend and stricter credit policies have affected the confidence of home buyers, Shanghai Forte Land Co Ltd, a Hong Kong-listed property developer, said in an interim report released Wednesday.

Forte Land, owned by Guo Guangchang, one of the richest men on the Chinese mainland, said first-half profit attributable to equity holders tumbled 42 percent to 35.98 million yuan (US$5.25 million), or 0.014 yuan a share, from the same period a year earlier. This was due mainly to higher land appreciation tax, provisions and increased operational costs.

The company will not declare an interim dividend as its application for A-share public offering is still pending government approval, Forte said Wednesday in a statement to the Hong Kong stock exchange.

Turnover for the six months ended on June 30 fell 22.7 percent to 1.033 billion yuan on a 64.1-percent plunge in gross floor area, or GFA, booked during the period.

Between January and June, Forte sold a total of 241,536 square meters in GFA, against 420,647 square meters in the first half of 2007. It said a total of 34 projects, with a combined GFA of 2.276 million square meters, were under development in the period.

In terms of land bank, Forte acquired three projects, with a total saleable GFA of about 400,000 square meters during the six months. That was down some 46.7 percent from the same period a year earlier, during which the firm gained a total GFA of 750,000 square meters.

For the second half, Forte plans to launch promotions to accelerate sales, speed up the development of existing land banks to prepare for a market recovery and will continue to raise land reserves prudently.

Separately, Shanghai-listed China Enterprise Co Ltd said first-half profit plunged 36.36 percent to 221 million yuan because operational expenses had risen from a year earlier.

Most industry experts believed the current tough market situation will last at least until the end of this year and domestic real estate developers will need to make some adjustment in order to survive, although long-term prospects for the industry still remain positive.

Source: CRIEnglish