(Yicai) Aug. 28 -- China’s real estate market is close to finding its floor, as sales are picking up, according to the chairman of Shui On Land, which develops luxury housing projects in the Chinese mainland.

“We believe the market is now nearing the bottoming-out stage,” Vincent Lo said on the Hong Kong-based company’s first-half earnings conference call yesterday. “We see it as very close to the bottom because of the supportive policies by the government and the supply-demand rebalancing.”

China’s property market slump has been going on for five years, but is showing tentative signs of stabilizing, mainly in tier-one cities, amid a “whitelist” initiative that allows cities to nominate eligible housing projects for bank financing to ensure construction and delivery and policy easing to boost buyer confidence and sales.

Even if the market is showing widening divergence, transactions are gathering pace, prices are beginning to steady in first-tier cities, particularly Shanghai, and urban regeneration is gaining momentum thanks to policy support, Lo pointed out.

“In the short term, we will continue to expand on our asset-light strategy and look to capture selective opportunities,” Lo added. “We will continue to manage our liquidity prudently, and we will look for attractive acquisition opportunities as we see the market bottoming out."

Shui On has four asset-light projects under construction or in the planning phase, all located in Shanghai. They have a combined living area of 1.23 million square meters and a cumulative commercial area of 295,000 sqm.

As of June 30, the builder’s investment properties were valued at nearly CNY97 billion (USD14.4 billion), with Shanghai accounting for about CNY77.8 billion or 80 percent of that, Chief Financial Officer Douglas Sung said on the conference call.

“On the retail front, the consumer market remains subdued, while consumption of services and experiential spending are gathering pace,” Lo said. “We have seen a modest recovery in Shanghai’s retail market, with rental declines moderating and prime retail spaces recovering faster.”

For the office sector, Lo explained that demand in core cities is showing early signs of recovery, supported by high-value economic activity, with the pace of rental declines slowing. The recovery will likely be led by high-quality assets in core locations, he added.

Shui On recognized about CNY748 million (USD111 million) in property sales in the first half, down 37 percent from a year earlier, mainly because of fewer residential project completions. As a result, revenue slid 18 percent to CNY1.7 billion (USD255 million), it financial report showed late yesterday. Despite that, net profit surged 53 percent to CNY403 million.

To celebrate its 20th listing anniversary, Shui On announced a special dividend of 4 HK cents (0.5 US cents) per share. Its shares [HKG: 0272] closed 14.8 percent higher at 46 Hong Kong cents (6 US cents) apiece today.

The financial contribution from property sales will become more apparent in upcoming reporting cycles, said Chief Executive Jessica Wang. The company achieved contracted sales of CNY3 billion in the six months, with CNY460 million in subscribed sales.

As of June 30, Shui On had locked in CNY19.4 billion (USD2.9 million) of secured sales awaiting recognition as revenue, which will be delivered and booked in the second half and beyond.

Editor: Futura Costaglione