Longfor looks to south for land of more opportunity

Hong Kong-listed mainland developer Longfor Properties is seeking to expand its footprint into southern China where it is acquiring land sites for new projects.

'We have been buying land plots since the beginning of this year and continue to do so,' Longfor chief executive Shao Mingxiao said.

'We are buying not in a lavish but a cautious manner.'

Addressing the media during a dinner he hosted in Chongqing last week, Shao said Longfor had spent 2.2 billion yuan (HK$2.7 billion) so far this year to buy five sites: two in Xian and the others in Shenyang, Ningbo and Shaoxing.

The group is the biggest developer in Chongqing.

'We've been looking for opportunities in southern China, including Fujian's Xiamen, Zhangzhou, and Quanzhou,' Shao said.

'This is because land costs there are more competitive than in other places, and homebuyers there are similar to our target clients.'

The group, which is targeting larger sites of more than 200,000 square metres, had a land bank of 34.73 million sq m on the mainland as at the end of April.

Longfor's latest buying spree comes as the mainland property market begins to show signs of recovery. Shao said the group was registering a steady monthly increase in sales and expected a further increase this month.

Contract sales, or sales for which contracts had already been completed, totalled 12.92 billion yuan in the first five months of the year, according to the company, and last month amounted to 3.35 billion yuan, representing month-on-month growth of 10.2 per cent and a year-on-year increase of 7.4 per cent.

The company sold old stock in the first five months of the year and this month began launching more than 6 billion yuan in new projects targeted mainly at middle- and lowerincome homebuyers.

Shao said Longfor would release the new projects onto the market between June and October.

It planned to put 7 million sq m of flats from 55 developments on the market this year, equating to a total market price of 78 billion yuan.

Of that total, 56 billion yuan would come from flats in new projects or new phases of existing projects.

Quizzed on his view of the outlook for the mainland's housing market, Shao said he was optimistic, adding: 'This year can't be worse than last year.'

While he cautioned that he did not expect a strong rebound, he did say the macro-economic situation on the mainland was worse than expected and this could prompt the government to loosen its controls over demand for housing.

Longfor would invest up to 10 per cent of its sales revenue in commercial properties every year because they could generate high and stable profit margins, he said.

The company's shopping mall in Chengdu, Sichuan province, will open next year and it will open two more in Beijing and Hangzhou in the next two years.

Shao said the group would not consider raising funds through issuing high-yield bonds because the cost was too expensive and its financial strength was strong. Last year, Longfor secured US$750 million in bond financing and US$250 million in syndicated loans.

Longfor Properties closed at HK$11.9 per share on Friday, up from HK$11.84 on Thursday.

20%

The year-on-year drop in the price of land in Xiamen and Quanzhou, according to Longfor chief executive Shao Mingxiao