CDL confident China’s property market will not crash

Singapore’s City Developments is confident China’s residential property market won’t crash. And it’s waiting for opportunities for hotels to get cheaper for acquisitions.

City Developments is planning to launch its first residential development in Chongqing in southwest China next year, should the property market improve.

Its confidence in the market is underpinned by a trust that authorities will act to avoid any sharp correction in prices.

Kwek Leng Beng, executive chairman of CDL, said: “This sector is too big a pillar for the China market to allow the property market to crash and there will be a lot of upheaval. In fact, recently the central bank seems to be relaxing the reserve ratio of the bank and so on.”

Cautious about the global economy, CDL’s chairman forecasts recovery in three to five years.

He’ll also be hoping for a recovery in earnings growth, after second quarter profit dropped by more than a third and sales slumped 20 per cent.

Wilson Liew, investment analyst, Maybank Kim Eng, said: “The earnings this time round is in line with our expectations and I think going forward, in the second half, we do not expect major surprises as well.

“But there could be a potential slowdown in terms of the hotel operations but credit to Millennium & Copthorne, the hotel subsidiary. I think they have done very well to control cost so I think that would mitigate any risks.”

Hotel operations was the second highest contributor to CDL profits. Overall Revenue Per Available Room (RevPAR) in CDL’s hotels worldwide increased by 4.5 per cent in the second quarter. CDL increased the most in Asia by 14.2 per cent.

While CDL said hotels are now too expensive to acquire, it’ll open its Singapore hotel development in Sentosa Cove in September.

Source : Channel NewsAsia – 14 Aug 2012