Savvy developers are adapting to changing demand. One developer we visited in Hefei is constructing environmentally-friendly apartments with centralized temperature controls, humidity controls, and air purification. Such features have been a hit with buyers, possibly because of concerns about air quality and the cost savings to buyers of installing their own air purification systems.
Our important takeaway was: even as home purchase restrictions have reduced speculative buying, overall demand dynamics remain healthy in the cities visited and were well-supported by multiple organic and inorganic factors like low land supply, population growth, and high priced land auctions.
That said, local government appetite for seeing price growth seemed low, hence tight approvals for pre-sales with prices caps were expected to stay in near future. Furthermore, policies have become localized and were being fine-tuned according to local conditions.
This implied developers with diverse sets of cities and projects in their land bank portfolio with a wider nationwide coverage would benefit while those overly concentrated in a particular city with restrictions could see their churn negatively affected, impacting their creditworthiness.
In sum, we see opportunity in the market and remain positive on high-yield China real estate developers, particularly those that are diversified nationally.