Chinese real estate stocks are soaring despite property market fears

Firms like Sunac, Evergrande among top performers

Apr.April 18, 2017 10:02 AM

A view of the skyline of Pudongs Lujiazui Financial District in Shanghai (credit: Getty Images) and Evergrande’s Hui Ka Yan

Chinese real estate stocks are racing ahead of their U.S. counterparts, but analysts are split over whether the rally can continue.

Chinese firms accounted for nine of the 10 best performing stocks in the Bloomberg World Real Estate Index so far this year. Firms like China Evergrande Group — which is the country’s largest homebuilder by sales and is battling for control of the country’s second largest builder, Vanke — and Sunac China saw their stock rise more than 70 percent.

Still these firms face a tougher environment now that several major Chinese cities have imposed restrictions on home purchases in a bid to cool the property market.

“Investors will be more selective in buying the stocks this year,” BNP analyst Wee Liat Lee told Bloomberg. “Large developers will gain market share from the smaller players. You need to be a very big developer with diversified exposure across different cities in China to thrive amid tougher curbs.” Debt is another issue: Both Sunac and Evergrande are highly leveraged.

Other analysts argue that even if the market slows, the continued flow of money into Hong Kong’s Stock Market Could Still Drive up valuations. “Many overseas funds argued that they’re not comfortable with these aggressive firms,” Citigroup analyst Oscar Choi told Bloomberg. “But with Chinese investors rising as a new source of purchasing power, these bears don’t have too much say.”

The Chinese government won’t introduce a property tax this year, despite the belief that it would help curtail the country’s soaring home prices. Dalian Wanda Group CEO Wang Jianlin warned last September that China is now “facing the biggest bubble in history.” [Bloomberg] Konrad Putzier

Related Articles

With a cooling trade war, stocks perform well, including real estate. (Credit: iStock)

Real estate stocks push up this week as U.S.-China trade tensions ease

416 West 25th Street and Maverick Real Estate Partners principal David Aviram (Credit: Google Maps and LinkedIn)

Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case

Commercial loans expected to suffer because of the pandemic (Credit: iStock)

March saw fewer CMBS delinquencies. That is likely to change: Fitch

(Credit: iStock)

Thousands of CRE borrowers call on banks for debt relief

Banks, funds, mortgage REITs, and agencies like Fannie Mae and Freddie Mac have all begun adjusting their lending approach in face of the economic downturn (Credit: iStock)

These are the sectors where real estate lending is still happening: report

Angel Oak Cos. CEO Michael Fierman and Flagstar Bancorp Inc. CEO Alessandro DiNello (Credit: Angel Oak, Flagstar, iStock)

Mortgage market dries up for unconventional home loans

A WeWork office (Credit: Alex Tai/SOPA Images/LightRocket via Getty Images)

WeWork offers rent discounts as incentive to secure long-term leases

Gary Barnett, Central Park Tower, and the Tel Aviv Stock Exchange Bull (Credit: Wikipedia, iStock)

Extell’s Israeli bonds put on downgrade watch