• Mon
  • Jul 28, 2014
  • Updated: 2:47pm
PropertyHong Kong & China
MAINLAND PROPERTY

Chinese property firms push brand recognition to give themselves edge

Having a big name gives firms pricing power and helps them buy rivals, the main way to grow

PUBLISHED : Wednesday, 08 January, 2014, 5:35am
UPDATED : Wednesday, 08 January, 2014, 5:35am

Mainland developers are ploughing more effort and money into strengthening brand names as part of a strategy to sharpen their competitive edge when industry consolidation intensifies.

Mainland property sales exceeded 7 trillion yuan (HK$8.9 trillion) last year. Sales growth is expected to slow now that almost all families own at least one home. This means that only the stronger developers will survive by taking over smaller rivals and thereby increasing their market share.

"A strong brand name will increase the chances of success, as it will not only help attract more homebuyers but also enable developers to cut costs by winning the trust of suppliers and lenders," said Zhu Yiming, a Shanghai-based analyst with the mainland's leading private real estate consultancy, CRIC.

Mainland banks lend only to developers on their own confidential lists, which include industry leaders and state-owned homebuilders.

The case of developer Greentown China demonstrates the advantages of having a strong brand. The Hangzhou-headquartered developer was caught in a policy-induced industry downturn and faced cash flow difficulties until Wharf Holdings became a strategic investor in June 2012 by offering a capital lifeline of over 4 billion yuan.

"Over the years, Greentown China has built up one of the most valuable brands in the property market in the PRC," said Wharf in a statement announcing the deal, adding that Greentown was the No1 for "residents' overall satisfaction" in 2011. It kept that award in 2012 and 2013 in the same branding report released by the China Index Academy (CIA), the mainland's top real estate consultancy.

The latest report put the brand value of Greentown China at 19 billion yuan last year, up from 12.6 billion yuan in 2011. "Brand building involves a comprehensive effort," said Jiang Yunfeng, head of the CIA research team producing the annual reports.

In dollar terms China Overseas Land & Investment, the mainland's most profitable developer, has topped the brand rankings for the past five years, with a value of 29.8 billion yuan last year. It was closely followed by China Vanke, the largest developer by sales revenue.

"A brand name is a reflection of corporate spirit," said Liu Xiang, head of Beijing sales for Poly Real Estate, which was ranked the third most valuable developer brand.

Branding power enabled 10 top developers to price their products up to a third higher than the average home prices in the cities in which they released units for sale in 2012.

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