What do 2008 figures tell us?
Vacant space is drawing wide attention
The market started worrying about the accumulation of vacant space in
late 2008 and chattered about the digestion cycle required to diminish
potential inventory. In each of the nine major cities we track, the time
frame needed to digest property has grown y-y. A further look at the
property under construction shows how sizable potential supply is. If we
treat these figures as inventory, the digestion time frame is even longer.
Ratio of property sold to new housing is in decline
The ratio of residential properties sold to new housing starts shows a
decline in all of the nine major cities we cover. This suggests the
decrease in property sales is moving at a much faster pace than the rate
of new housing starts, indicating that future new supply will be abundant,
relative to property sales volume.
Change in property sales by value closely tracks volume
The National Bureau of Statistics (NBS) figures show that 2008’s
residential property sales by value and volume are down by a margin of
19%. This is the first decline in the past ten years. The 2008 y-y change
in property sales and volume were in tandem, signifying that national
property prices haven’t changed much. There is no universally-accepted
property price index in China, but if we use leading developer’s ASP as
a proxy, property prices in China have fallen by less than 15% y-y in
2008.
NEUTRAL recommendation; top picks are Shimao, CR Land
Given the evidently sizable inventory, ASP for most developers may face
heavier downward pressure this year. Only price cuts could markedly
revive buying sentiment and move volume.
We like Shimao for its balanced earnings mix, diversified landbank for
which we believe it deserves to trade at a slight premium compared to
similar peers. We also like CR Land for its superb financial health,
landbank diversity and high sales locked-in ratio.

Contents
What do 2008 figures tell us? ........................................................................................ 3
Vacant space is drawing wide market attention 3
New supply without commensurate increase in sales 3
Completion rate slows as developers delay completion 4
Change in property sales by value tracks the volume 5
How have the prices changed? 8
How have prices changed – according to developers? 9
Market still fragmented, more consolidation to come 11
Affordability ratio falls over the edge … more to come 11
Company updates........................................................................................................ 15
Shimao Property 16
China Resources Land 23
Guangzhou R&F 26
Country Garden 29
Agile Property 32
COLI 35
Sino-Ocean Land 38