Xinyuan Real Estate 3Q16 Earnings Call Notes

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Yuan Zhang

Government announced tightening measures to cool real estate development in several cities

“And now, let’s talk about the government policy changes. In early October, when the Chinese real estate market was experiencing a meaningful development, the local governments in about 20 cities announced the tightening measures designed to cool a market with escalating prices. These measures announced included higher down payments and home purchase restrictions. Despite the restriction policy, the overall underlying home buying demand remains favorable in our local markets. For example, in our Zhengzhou International New City Phase I project nearly 100% of presold units were booked on Alibaba’s house booking system within a few hours. And nearly no buyers withdrew their deposit after the restriction policy was issued. From the beginning of this year, housing prices increased dramatically in certain cities in China. While we’re sharing the benefit of the price upside, we believe the goal of the government’s restriction policy is to maintain healthy and stable development of the market by cooling down escalating prices in certain cities, which we support for the long-term sustainable growth of our business.”

This is the third time that local government has imposed restriction policies

“Actually as far as I can recall, this is the third time that the local government are imposing the restriction policies. According to our prior experience the restriction policies probably could last for six or nine months, less than a year. And also we believe the goal of the policy is to cool down the fast growing prices in some cities and areas, and try to make the market more healthy. And this is what we are looking for. And try to give you some example, from the beginning of the year until the end of September, most – almost all of our project are benefitting from the pricing outside – from well-buy [ph] from 30% to even 50%. So we believe the policy may cool down the prices for a while, but we are confident for the market momentum, because we believe the demand is still there”