China property

Chinese home builders raise full-year targets amid upbeat first-half sales

Analysts caution China’s housing market could unexpectedly cool in the second-half unless credit easing measures are extended

PUBLISHED : Wednesday, 06 July, 2016, 4:03pm
UPDATED : Thursday, 07 July, 2016, 12:05am

A number of China’s leading property developers have raised their sales targets after posting significant sales growth in the first half of the year.

Analysts say the strong performance has been driven by the central government’s prolonged credit easing measures, but they caution that policy could be tightened in the second half.

Shanghai-based CIFI Group, on Wednesday said it has revised its full year contracted sales target by 20 per cent to 43.8 billion yuan, from 36.5 billion yuan.

The company’s sales surged 162 per cent year on year in the first six months to 27.6 billion yuan.

Helped by a sturdy recovery in Shanghai and Suzhou city, the developer saw its average selling price jump 107 per cent to 27,300 yuan per square metre.

Country Garden, one of the biggest Chinese developers, also raised its annual target to 220 billion yuan, a 31 per cent rise.

The Guangdong developer was one of five that saw their sales surpass 100 billion yuan in the first half, the other four were China Vanke, Evergrande Real Estate, Greenland, and Poly Real Estate.

Vanke, the property giant which has been trying to fend off a hostile takeover since last year, continued to lead the gainers. It recorded sales of 190 billion yuan from January to June, a 73 per cent year on year growth.

“Policy has supported the sector and liquidity has been ample, 2016 is a pretty good year for developers,” said Alan Jin, a property analyst at Mizuho Securities.

Jin expects sales growth would be moderate in the coming six months given the government policy is unlikely to be as supportive as in the first half.

China has issued a series of stimulus measures earlier this year to boost home-buying demand. These include a reduction in interest rates and home transaction taxes and a lowering of the minimum down payment requirement.

“It all depends on the policy changes, and the liquidity tends to be tightened,” he said, citing currency volatility and the capital outflow pressure.

Jin added that some second-tier cities may introduce new measures to cool down the overheated market.

JPMorgan forecasts that sales would slow down from the high base in the first half.

“The current policy support could have released most demand pent-up from 2014 and probably have also brought demand forward,” Ryan Li, a property analyst at JPMorgan, wrote in a note this week.

Global rating agency S&P says growth in nationwide home sales has likely peaked and will moderate to a single-digit percentage for the 12 months ending May 2017, down from 32.2 per cent for the 12 months ended May 2016.

Meanwhile, JPMorgan’s Li said net gearing is likely to come down for most developers because of a more cautious approach to land acquisitions.

“On average major listed developers’ land purchases are 36 per cent of their contracted sales [this year],” he wrote.