April 26, 2017 / 7:30 AM / 3 years ago

UPDATE 2-China's Xian housing authority halts sales of developer Vanke

* Authority suspects regulation violations at two Vanke projects

* Suspends all Vanke, subsidiary sales in Xian

* Authority also halted sales of four other developers

* Vanke’s HK-listed shares close down 2.6 percent (Adds details on suspected violation, updates share price)

By Donny Kwok

HONG KONG, April 26 (Reuters) - The housing authority of China’s Xian city on Wednesday said it has suspended sales of projects by China Vanke Co Ltd, the country’s second-biggest homebuilder by sales, citing property transactions that it suspects are “against regulation”.

The Xian House Management Bureau, in statements on its website dated April 24, said it suspects three property agents sold units at China Vanke’s Oriental Legend and Cityglory projects before obtaining pre-sale approval.

The action comes as the government attempts to quell a property boom which last year pushed new home prices up at the fastest rate since 2011. Measures include putting local authorities on guard for market irregularities and pressing banks to strengthen mortgage risk management.

“I believe this is part of the government’s crackdown on aggressive property sales tactics in China,” said Cindy Huang, a credit-rating analyst with S&P Global.

“Based on our estimate, sales from Xian accounted for about 4 percent of Vanke’s total sales last year – financial impact is manageable but could be damaging reputationally if the situation is not resolved.”

Xian said it halted pre-sales and sales at all 12 projects under development by Vanke and its subsidiaries in the capital of Shaanxi province with immediate effect.

It also suspended new pre-sale applications at Vanke’s other developments in the city. In addition, it said it has suspended the three agents from conducting further sales in the city.

Xian said in another statement also dated April 24 that it had suspended sales of four projects by four other local developers who it also suspected had violated sales regulations.

China Vanke, which has a market value of around $33 billion, did not respond to a request for comment. Its shares ended the day down 2.6 percent in Hong Kong and 0.9 percent in Shenzhen.

The developer has been in crisis since late 2015 when financial conglomerate Baoneng Group built up a 25 percent stake and sought to oust its management.

In March, Vanke came under direct control of the Shenzhen government, a move that could end boardroom struggle but which raised questions as to the extent the developer would remain market-driven.

China’s real estate sector contributes around 15 percent to economic growth. Both central and local governments have been keen to take a more active role in the market, particularly as prices have become a concern for policymakers. (Reporting by Donny Kwok; Additional reporting by Umesh Desai and Yawen Chen; Editing by Anne Marie Roantree and Christopher Cushing)

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