China’s property on roller coaster ride

China’s property on roller coaster ride
17/01/2017 , by , in INTERNATIONAL

China’s richest man, Wang Jianlin, criticised the country’s close control of its property industry, saying the “excessive cyclicality” caused by that was a reason for his conglomerate’s planned move to exit the real estate development business.

The criticism is a rare one from Wang, who has previously backed China’s measures to guide the property industry. It comes after his Dalian Wanda Group said on Saturday 2016 revenue dropped by 13.9 percent, weighed by a 25 percent decline in its commercial property unit.

It was the first decline in Dalian Wanda Group’s revenue after years of double-digit growth.

“Wanda’s decision to exit real estate development is not because of its bearish take on China’s real estate industry but primarily based on two reasons,” Wang told an internal company annual meeting on Saturday, according to a Dalian Wanda release published on Monday.

“First, China’s real estate development market is too cyclical, to a degree that is, so to speak, rare around the world.”

Dalian Wanda Group’s revenue from real estate business fell below 50 percent of the total for the first time in 2016, as the group diversifies to cultural and tourism operations amid slowing property sales.

The group has also recently been moving towards an asset-light strategy, which means eventually being a property service provider, rather than selling property. Wang cited the changed business model as the second reason for exiting the development business.

It forecast group operating income to rise 3.9 percent in 2017, a similar level as last year. The commercial real estate arm, Dalian Wanda Commercial Properties, is expected to reverse the revenue decline and post mild growth, with a boost in rental income offsetting the diminishing sales business, it said.

Wanda Commercial, which already includes more than 130 shopping malls and over a dozen planned mega-cultural developments throughout China, will open 50 more malls and sign contracts for around three more Wanda City this year, the group said in the statement.

“After the completion of all Wanda City projects, Dalian Wanda Commercial Properties will gradually exit from the real estate development industry,” Wanda said.

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