2015 market outlook and our Group’s strategies

Under the new economic environment in 2015, the “prime era” of China’s real estate industry has come to an end — audacity, high yield and high growth will gradually give way to steady and rational growth, entering the “silver era” and “professional prime era”. Meanwhile, “vendor’s market” is switching to “buyer’s market” — over supply is putting pressure on the profit margin. Companies are not competing in scale, speed and resources but in product, service, cost and efficiency.

Our Group is of the opinion that the industry will still enjoy steady growth in the next 10 years. Firstly, real estate industry being the supporting pillar in national economic development, the stable development of which helps promote the steady growth of the macro economy and alleviate the downside risks. Secondly, China’s medium to high economic growth and continuing urbanization provide the demand to sustain the industry’s development. Futhermore, with years of development in the real estate industry, much demand for basic properties has been satisfied. Demand for higher quality housing is gradually becoming the mainstream demand. This drives the growth of a new round of investment in real estate industry. We take the view that the simpler administration of the macro measures, the more market-oriented management, the land reforms and household registration reforms are all beneficial to the healthy development of the industry.

In 2015, credit in general is easing. Liquidity indicators such as mortgages, development loans and interest rates will improve, benefitting the industry directly or indirectly. Rebalance the stock will still be the focus in the first half of 2015 and prices will bottom out but differentiation among cities will be accentuated. We think that prices in first tier cities in 2015 will remain stable or rise slightly. There will be room for price rise in some second and third tier cities where the consumption cycle is slower and there is no over in supply. For some other second and third tier cities where supply exceeds demand and inventory is unreasonably high, prices will continue to be suppressed in order to stimulate sale.

There is a consensus in the industry that changes and reforms are the way forward. On one hand, as profits from conventional housing development will continue to be squeezed, developers will explore various product mix based on their own specialties to expand business base and profit channels. On the other hand, as technology evolves rapidly, cooperation between the real estate industry and the Internet will accelerate, especially in the areas of promoting sales and branding.

While reviewing our third phase of strategic development, our Group examined the profound changes within the industry. Working on it for a year, we have now formulated the fourth phase of strategic development which will kick start in 2015. In this “professional prime era”, our Group will be following the development objectives of “prioritizing effectiveness, making remarkable changes, setting our sights on long-term development through prudent management and risk control and pursuing perfection” to create our quality, sustainable and stable development.