New World China favours medium-sized homes
Strong housing demand from China's growing white-collar and middle-class families has prompted New World China Land to build more mid-sized residential projects.
Large scale new residential projects as well as old town redevelopments in key cities will be a prime focus for the company, said Adrian Cheng Chi-kong, executive director for the Hong Kong-listed mainland property arm of New World Development.
As the housing market booms, New World China aims to build more 30-50 square metre houses to tap into the white-collar market and speed up its developments in second-tier cites, bringing the company a faster return on investment.
'We target a completion area of about one million sqmetres [of gross floor area] in fiscal 2008, in which Guiyang, Chengdu and Changsha would account for 24 per cent of the total gross floor area,' Mr Cheng said. Developments in the mid-west region will be the company's new growth engine, he said.
Average selling prices are expected to drop to about 6,000 to 6,500 yuan per square metre, from 8,000 yuan this fiscal year because of lower selling prices in second-tier cities, Mr Cheng said. Gross proceeds from property sales in the next fiscal year probably would grow 10 to 15 per cent based on the 5.2 billion yuan last year because of larger sales volumes.
'I am confident our gross profit margin can be maintained at about 30 per cent,' he said.
New World aims to complete about 1.3 million square metres to 1.5 million sqmetres of gross floor area in 2009 and two million sqmetres in 2010. Meanwhile, revenue contribution by investment properties will climb to 10 per cent in three years from 7.7 per cent.
The central government's policies on overheating in the property market meant that it no longer provided incentives for foreign investment in new ordinary residential developments, Mr Cheng said, adding their impact was difficult to evaluate.
Wingo Chan, executive deputy general manger of the Beijing branch of New World China Land, said about 1.7 million sqmetres of a planned 3.6 million sqmetres of gross floor area had been built at its redevelopment project in the city's Chongwen area.
Mr Chan said the relocation of occupants of 9,000 units in plot number six of the area could be completed by the end of next year.
The company has invested more then 10.5 billion yuan in the project.