China’s regional developer Yuzhou Properties’ strategic shift pays off

A shift out of its hometown of Xiamen and an aggressive land buying spree in the past two years have resulted in Yuzhou Properties emerging as a national homebuilder.

The strategic move into Shanghai, Hefei and Nanjing also saw the developer recording exceptional sales growth this year.

“We selected the cities at the right time,” Lam Lung-on, the company’s founder and chairman, told the South China Morning Post.

Yuzhou Properties’ contracted sales surged more than 120 per cent to 14.8 billion yuan (HK$17.17 billion) in the first seven months of this year from the same period last year, thanks to sales in Shanghai, Hefei and Nanjing. The sales growth was one of the biggest among the country’s developers.

The three core cities on the Yangtze River Delta have led in home price gains across the country this year. Prices in the cities soared more than 30 per cent in July on year, data from the National Bureau of Statistics shows.

“Our national strategy is complete and we are no longer just a leading developer in Xiamen,” Lam said.

He said his company would in future focus on Shanghai, Nanjing, Hefei, Hangzhou, Xiamen, Fuzhou and Tianjin.

In June, Yuzhou moved its headquarters to Shanghai from Xiamen to embark on its ambition to become a top-tier national player.

The company has built a land bank of 9.3 million sq metres, with almost 60 per cent of it in the Yangtze River Delta, one of the world’s largest urban areas in terms of size and population.

The land bank was sufficient for the company’s development in the next three to four years, Lam said.

The company spent 15.2 billion yuan buying land up to July this year, far exceeding the 8.6 billion yuan spent for the whole of last year.

With exposure to cities with fast-growing economies and robust demand, Lam said the company’s gross margin could remain above 32 per cent in the next few years.

“Land is expensive in first and second-tier cities, but it is worth it,” he said, adding that prices had already risen above those for the land bought at the beginning of the year.

Meanwhile, Yuzhou Properties has raised its sales target for this year to 22 billion yuan from 16 billion yuan.

Lam said the company would make more investments in the Yangtze River Delta as the region’s economy was growing faster than most cities in the United States and Europe.

“These cities will continue to attract people to move in, but with less land supply, home prices will climb,” he said.

Lam also said the developer might slow its pace in bidding for land at public auctions as it had accumulated enough sites in the past two years.

We would seek opportunities through different channels, he said.

In July, the company secured three land parcels totalling 145,000 sq metres in Hangzhou by acquiring a property development company owned by the State Tobacco Monopoly Administration. It paid 4.1 billion yuan, or 13,800 per square metre.