Developer Country Garden led its rivals in January’s land purchases
The company has been aggressively building up its land reserves to pursue fast sales growth as it attempts to topple rivals Evergrande and Vanke
Country Garden spent more than any other Chinese developer on land acquisitions last month as it pursues faster sales growth in a bid to catch rivals China Evergrande Group and China Vanke.
The developer, which is based in Foshan city in Guangdong Province, is the mainland’s third biggest property developer by sales but is aiming to topple Evergrande and Vanke to take the top spot.
Country Garden splashed out 10.2 billion yuan for 14 land parcels last month, including a 2.25 billion yuan residential site on the outskirts of Shanghai. The other plots are all in smaller cities such as Hangzhou, Nanchang and Wenzhou, according to a report by Tospur Real Estate Consulting.
Hangzhou-based home builder Greentown China ranked second with 8.4 billion yuan of land purchases, followed by Shanghai-headquartered Future Land Development with 8.2 billion yuan.
“Country Garden is fighting to become champion in home sales this year, ” said David Hong, head of research at consultancy China Real Estate Information Corp (CRIC).
The company has been aggressively building up its land reserves to pursue fast sales growth in the past couple of years, and the latest land acquisitions show the developer’s bullish outlook for the next few years.
Hong said home sales in Chinese second- and third-tier cities, which Country Garden has been focused on, remains strong because there are fewer restrictions on buying than in top-tier cities.
Country Garden in 2016 reported contracted sales of 308.84 billion yuan, more than double the level a year earlier.
That took the company up to third place among Chinese developer by sales, trailing Evergrande and Vanke.
Market sources said Country Garden had set an internal sales target of 500 billion yuan in 2017, but a company spokesperson refused to comment on the sales or land purchase plan.
Country Garden’s aggressive land bidding has led to a heavy debt burden.
Its net gearing ratio surged from 60 per cent in the first half of 2015 to 88 per cent at year-end, and remained as high as 84 per cent by June last year. That’s higher than the 75 per cent regarded as a healthy level in the industry, SWS research estimates.
The company last year spent 177.5 billion yuan on land investment, according to CRIC, more than three times its land purchase in 2015.
However, Wu Bijun, the general manager of the company’s finance centre who will be the new chief financial officer effective from April, 2017, said some of the land has doubled in value since it was purchased, which would bring the company substantial profit.
“The thing is that you have to establish your presence in these markets first, or they will be dominated by others,” she said.