Big Developers Eat Small Developers

Stocks are cheap, land is expensive. If you want to buy land, buy it via the equity market.

Stronger Chinese developers advised to snap up cheaper and weaker peers

"Property shares are seriously undervalued and I think good developers, especially those listed firms with strong financing support, now have the best opportunity to acquire others through the capital market," Henry Cai, the executive chairman of Deutsche Bank's Asia-Pacific corporate finance section, told a recent property forum.

"Listed firms should take over others before they are blown down. It's cheaper to acquire their equity stakes than directly buying their land reserves, and it's also cheaper than land parcels from auctions held by the government."

A piece of land could easily cost billions of yuan in major cities such as Beijing and Shanghai, as supply in core areas was scarce.

Local governments were also reluctant to cut prices despite the market downturn.

On the other hand, most developers are trading at price-earnings ratios of five to six, down from double digits during the industry's heyday a few years ago.