New | China developers expected to ramp efforts to meet full year sales targets
The major developers are likely to cut prices in an effort to meet annual targets, analysts say
China's developers will increase project launches in the next two months, cutting prices if necessary, to hit full-year sales targets, industry analysts said.
With the year's best season ending, about half of the 30 major developers on a list by consultancy E&H Corp still had to plug a 20 per cent gap in their annual sales targets.
Standouts included Evergrande Real Estate, the country's No 3 developer in sales, which posted a 130 per cent surge in contracted sales in October from September to 25.8 billion yuan, pulling the total in the first 10 months to 154.5 billion yuan, surpassing its full-year target of 150 billion yuan.
The industry's No 1 developer, China Vanke, had contracted sales of 204.1 billion yuan in the January-October period, and told investors that full-year sales could hit 250 billion yuan.
"Developers are confident of fulfilling their full-year sales targets as the new launches in the last two months are sufficient," Jefferies property analyst Venant Chiang said in a note.
Evergrande and Shenzhen Investment are expected to beat their targets by 20 to 30 per cent, and China Resources Land and China Jinmao Holdings may exceed theirs by 5 to 10 per cent. However, Guangzhou R&F Properties and Shimao Property may miss their goals, he added.
R&F reported contracted sales of 39.3 billion yuan in the first 10 months. Its annual target was revised in August to 55 billion yuan from 60 billion yuan. Shimao has yet to announce its sales performance in October.
Analysts said developers would have to sacrifice prices in order to stimulate demand. Evergrande's jump in October sales revenue came in with a dip in its average selling price to 7,860 yuan per square metre from September's 7,910 yuan per square metre.
Developers priced their newly launched projects in Shenzhen cheaper than expected in recent weeks, as sentiment cooled after a sudden surge in price and transactions during the summer.
Inventory overhangs have seriously hit developers' profit margins this year and poses a risk to the country's macroeconomic growth. Policymakers have cut interest rates six times in less than a year, alongside massive money printing, to stimulate demand.
The latest rate cut last month increased property sales by 10 per cent from September, in terms of area, according to consultancy Centaline China. Tier-two cities, mainly provincial capitals, recorded a month-on-month rise of 12 per cent.
"However, the impact of growth-supportive measures will become increasingly blunt and be insufficient to fully offset downward pressures," UBS China economist Wang Tao said. She predicted China's economy to grow 6.9 to 7 per cent this year, and 6.2 per cent next year.
She saw a 15 per cent probability of a hard landing in China.
Ryan Li, a property analyst from JP Morgan, said listed developers were taking different strategies to address an expected industry slowdown and the divergence would increase substantially next year.
