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Prospective customers look at a model of the Dalian Wanda Group Co. Oriental Movie Metropolis at a real estate showroom inside the project site in Qingdao on March 25. Photo: Bloomberg

Chinese developers see better sales in the second half, unfazed by market cooling measures

At least 10 big developers have set more aggressive full-year sales objectives after reporting strong first-half numbers

Chinese developers are raising their sales targets for the second half of the year, unfazed by a spate of government measures to cool the property market across at least 60 Chinese cities.

At least 10 of the biggest builders in the country have raised their full-year sales target for 2017 after posting strong results for the first six months, according to a tally by the South China Morning Post, backed by some developers’ upbeat projections.

They include Country Garden, China Overseas Land & Investment, Longfor Properties and Guangzhou R&F Properties.

“China’s tightening policies are to ensure a healthy development of the property market,” said Mo Bin, Country Garden’s president at its earnings press conference last week.

“We’re confident in the propery sector, whether there is tightening or not. China’s home sales are around the 10 trillion yuan level [every year], which leaves a lot of room for us to grow.” he said.

Country Garden, which ranked No.1 in contracted sales among all the developers in the first-half, is now targeting sales of 500 billion yuan for the year, up from the previous 400 billion yuan target.

China’s home sales are around the 10 trillion yuan level [every year], which leaves a lot of room for us to grow
Mo Bin, Country Garden

It achieved 289 billion yuan in sales in the first six months, representing a 131 per cent surge on year, thanks to numerous projects spread across the mainland that helped diversified risks, and its focus on smaller cities which saw rapid price increases because of less policy curbs.

The company said it would continue to invest in tiers one to five cities in the country and expected margin increases to extend to 2019.

Policymakers in more than 60 Chinese cities have imposed restrictions on buyers, selling prices and mortgage loans since late 2016 to fend off a housing bubble. Top cities such as Shanghai and Beijing have imposed the toughest controls, while policies are more flexible in smaller cities to provide support for first time buyers and rural-to-urban migration.

“China is very unique, every year there’re about 50 million rural people moving into cities under the state’s push for urbanisation, which has driven the property demand,” R&F chairman Li Sze-lim said in Hong Kong last week, during the company’s interim results announcement.

“That’s also why home prices continue to rise and the market remain robust despite the tightening measures.”

The developer, one of Guangzhou city’s biggest, lifted its 2017 sales target by 10 per cent to 80 billion yuan, after sales reached 38.8 billion yuan in the first half, representing a 30 per cent year-on-year growth.

Li Sze-lim says China’s ruaral-to-urban migration was a factor in sustaining demand. Photo: David Wong
It has also announced a 12.8 billion yuan sales target for 2018, a 60 per cent increase from its 2017 goal as the company plans to accelerate sales launches for its projects.
China is very unique, every year there’re about 50 million rural people moving into cities under the state’s push for urbanisation, which has driven the property demand
Li Sze-lim

Real estate and its related sectors account for about 30 per cent of China’s gross domestic product (GDP).

On average, new home prices in the 70 major cities tracked by the National Bureau of Statistics increased by 0.49 per cent in July, the 27th consecutive month-on-month increase for the 70-city index.

But the price growth moderated in the recent months in response to sustained policy pressure.

Nicole Wong, a property analyst at CLSA said the continued credit tightening would weigh on the sector.

She believes that many developers are preparing cautiously for the year-end, citing Country Garden’s second-half target (210 billion yuan) is actually lower than the actual sales it achieved in the first half.

“But at the end of the day, the government won’t want to see any developers get into big trouble, as the China banking system is so reliant on real estate as collateral.”

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