By Soo Ai Peng and Xie Heng
SHANGHAI/BEIJING (Reuters), Dec 15 - Chinese developers will face even tighter liquidity next year as Beijing imposes a raft of tightening measures to cool sizzling property prices, a leading Chinese developer said at the Reuters China Investment Summit on Wednesday.
Feng Lun, Chairman of Beijing-based Vantone Group, said he expects stubbornly high real estate prices to remain a top policy focus of the central government over the next two to three years.
But Feng believes the government may have taken the issue of high property prices too seriously, calling it a "puberty problem" akin to a teenager overreacting to acne.
"For most companies, the liquidity condition will get worse next year. For the residential housing segment, we will see more companies exit the industry as a result," Feng said.
Feng, popularly nicknamed the real estate philosopher by the Chinese media, said the tough operating environment will force out smaller and weaker players while top players, such as industry No.1 China Vanke, will gain market share.
As for listed unit Beijing Vantone Real Estate Co Ltd, Feng said it could maintain earnings growth of 15-20 percent next year. He also said commercial property would account for half of its total earnings in 8-10 years.
The industry will likely shift its focus to what he called an "American model" of commercial property development, which yields higher investment returns for developers but requires top-notch management capability.
The residential housing segment, on the other hand, will move toward the manufacturing model under which the government, anxious about increasing market supply to stabilize housing prices, will outsource housing projects to developers.
"Commercial property development is like Steve Jobs making iPhones and residential housing is like Terry Gou (of Foxconn International) doing original equipment manufacturing jobs," said Feng at the summit, held at the Reuters office in Beijing.
A PUBERTY PROBLEM?
Property tightening measures launched since April include higher minimum down-payment requirements and interest rates for mortgages and a cap on the number of houses an individual can purchase.
Beijing has also shut down some of the funding channels for the sector, including the popular property trust funds.
China's state-owned big-four banks recently named the real estate sector as one of bubble-prone industries and a source to the country's stubbornly high inflation. The bank had vowed to impose strict controls over lending to the sector.
In a wider effort to put a lid on rising consumer prices, China has also raised interest rates once over the past year, and has officially increased banks' required reserves six times, adding more pressure on developers.
The government may have overreacted, said Feng.
"This is just pimples triggered by puberty. It's not an illness that you need to go the hospital to see a doctor," Feng said of the country's property price fever.
He also dismissed talk that the Chinese property sector is a huge bubble waiting to burst.
"Nobody, either Western or Chinese economists, has ever gotten China's property market right in the past," he said.
"This is not a market economy and this is not a planned economy. We have created this thing that is neither a horse nor a mule. I don't think it's correct to see it from a such a simplistic point of view," he added, referring to the bubble theory championed by some analysts and foreign investors.
(Editing by Ken Wills)