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More developers saw profit decline in 2012

By Liang Fei (Global Times)

11:03, May 24, 2013

In a sign that real estate developers are suffering amid government tightening policies, a total of 87 listed developers reported a decline in operating profits last year, compared with 61 in 2011, according to a report jointly released Thursday by the China Academy of Real Estate and two other industry associations.

The report said that the average net profit of China's 145 listed real estate developers was 1.18 billion yuan ($192.3 million) last year, which was also lower than in 2011.

"The tightening policies are still curbing sales and some developers have felt less motivated to launch new projects," Hui Jianqiang, research director at real estate information provider Beijing Zhongfangyanxie Technology Service, told the Global Times Thursday.

Liu Yuan, a research director at Centaline China Real Estate, noted that property sales were sluggish in 2011 and given that the project cycle is long in the sector, the poor 2011 sales also dragged down the 2012 results.

In the first quarter of this year, nearly 35 percent of the listed developers reported a decline in net profits, and some small developers are planning to leave the business, media reports said.

The report also said that the debt ratio in the industry still remains at a high level. The average debt-to-asset ratio among listed developers reached 64.72 percent in 2012, approximately equal to the level in 2011.

However, experts noted that such a debt ratio is considered relatively normal for the real estate industry, and the capital chain in the sector still remains under control at present.

The report also noted that leading developers have been withdrawing from third-tier cities and their business focus has returned to first- and second-tier cities.

"There has been an oversupply of properties in the lower-tier cities," said Hui, adding that leading property developers are also sometimes at a disadvantage in competing with their smaller local peers.

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