Mainland developers see the value of teamwork in tougher market conditions
Builders are increasingly turning to joint ventures to develop land as property cooling measures start to take hold
Chinese builders are teaming up with each other to develop land they paid record premiums for at the market’s peak, as they try to withstand tightening liquidity and a dimmer outlook in the wake of property cooling measures.
At least eight major developers have partnered with their peers to jointly develop parcels of land they snapped up before October, according to the Post’s tally. They purchased plots at record prices in the first nine months of 2016 as cash-flushed developers flocked to compete for land in the mainland’s first and second-tier cities.
China Vanke this week forged a partnership withAnhui-based Wenyi Real Estate to develop a plot in east Hefei, which it had bought on September 23 for 4.88 billion yuan, 230 per cent higher than the starting bid.
The price tag is equivalent to 11,250 yuan per square metre of gross floor area, which means the developer has to sell homes built on it for at least 18,000 yuan to make a profit, analysts said. New homes near the site are currently selling for roughly 12,000 yuan per sq metre on average.
On October 28, Fuzhou-based Rongqiao Group announced a partnership with China Merchant Shekou Industrial Zone Co, a state-owned developer from Shenzhen, to develop a parcel of land in central Hefei. Five months ago, Rongqiao spent 7 billion yuan - a 271 per cent premium - to acquire the land. The price translates to 13,371 yuan per sq metre.
“Before the [cooling measures] it was extremely difficult, if not impossible, to have developers concede their equities after they acquired land in hotspot cities, as that meant conceding fat profits. Even debt-financing opportunities were difficult to find, ‘’ said Zhang Baoguo, chairman of Tong Kong investment Group. “Now under a tighter environment there are maybe more opportunities.”