Vanke sees short-term property headwinds in China

BEIJING, Aug 22 (Reuters) - China's biggest listed property developer, Vanke (000002.SZ) (200002.SZ), will probably see a slowdown in growth in the near future, but its long-term outlook is still rosy, the firm's president said in an internal e-mail. China's property market is showing signs of losing momentum after surging for the past few years. House prices in Shenzhen, Vanke's hometown, have been the hardest hit among 17 major Chinese cities, according to official figures. [ID:nPEK147396]

"The strong wait-and-see sentiment, the plunge in trading volume and bearish projections for the industry are all in sharp contrast to the conditions in 2006 and 2007," Yu Liang told Vanke staff in an e-mail on Monday.

With an industry-wide adjustment unfolding, the company's forecasts had proved accurate, Yu said in the e-mail, which was obtained by Reuters.

"From a short-term perspective, a number of uncertainties exist during the adjustment period," Yu said. He did not say when he expected it to end.

"Based on our judgment, the lack of capital in the industry will continue in the years ahead," he added.

But Yu said the current trend of stagnating prices and weak sales would not last for long.

"There's no room for property prices in China to drop sharply in the long term based on Vanke's analysis of supply and demand in the market," he said.

A Vanke public relations official confirmed the content of the email.

Founded in 1984, Vanke has been building apartments in a number of major Chinese cities, including Beijing, Shanghai and Tianjin. It reported a 24 percent rise in net profit for the first half of 2008. [ID:nSHA229027]

China's property outlook index, which covers price and investment trends, has been falling since it peaked at 106.59 in November. It dipped to 102.36 points in July but was still above the watershed of 100 that demarcates optimism and pessimism. (Reporting by Michael Wei; Editing by Alan Wheatley)