UPDATE 1-China Resources Land says residential market stabilising, but bubbles remain

Tue Aug 19, 2014 4:43am EDT

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By Clare Jim

HONG KONG, Aug 19 (Reuters) - Property developer China Resources Land Ltd said on Tuesday it sees the overall residential market stabilising in the second half, although a bubble has formed in some cities where steeper price cuts are needed to clear inventories.

Developers and investors are watching closely to gauge the impact of easing home purchase restrictions in some Chinese cities as data shows price declines spreading, underscoring a worsening downturn that is dragging on the broader economy.

"In some cities, there is excess supply and a bubble. It will require a longer time and steeper cuts to clear the inventories," China Resources Land chairman Xiangdong Wu said at a press conference in Hong Kong on Tuesday.

State-backed China Resources Land earlier said its core profit in the first six months climbed 83.7 percent to HK$3.7 billion ($477.41 million), benefitting from 2013 record sales that were booked in the first half of this year. Net profit climbed 13.4 percent to HK$5 billion.

Wu also acknowledged that full-year contracted sales could be slightly lower than its 70 billion yuan ($11.40 billion) target, just hours after the company said it was confident it would achieve that goal.

The outlook contrasts with that of China's largest residential developer, China Vanke Co Ltd , which said at an earnings press conference on Monday that home prices and sales volume would not rebound quickly even though many cities had eased restrictions on purchases. The company also said the market should not be too optimistic.

Developers have been scrambling to reach sales targets by introducing aggressive price cuts and promotions in a market that is plagued by high inventory and tight liquidity.

China's new home prices fell in July for a third consecutive month with price declines spreading to a record number of cities including Beijing.

At least 30 local governments, which earn a large part of their revenues from selling state land, have eased restrictions on property purchases that were put in place at the central government's behest when housing prices were soaring.

Some banks in top-tier cities like Shanghai and Shenzhen are also reportedly offering mortgage rate discounts to first-time homebuyers.

Shares of China Resources Land closed up 7.6 percent, outperforming a 0.7 percent gain for the broader market.

($1 = 7.7502 Hong Kong dollars) (Editing by Anne Marie Roantree and Matt Driskill)

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