Hong Kong company reporting season

Beijing unlikely to tighten property restrictions much more, says Future Land

The Shanghai-based developer announces net profit rose 34 per cent to 1.38 billion yuan in 2016

PUBLISHED : Monday, 27 February, 2017, 7:33pm
UPDATED : Monday, 27 February, 2017, 7:33pm

Restrictions recently introduced by the government to cool the Chinese property market are unlikely to undergo much further tightening, according to Future Land Development.

The Shanghai-based homebuilder said recent measures designed to rein in runaway house prices are “unlikely to tighten too much”, given that Beijing still has to get the economy back on track.

“On the premise that China’s real economy is still facing challenges and the central government aims to stabilise it in 2017, it is unlikely to bring in too much tightening in the real estate sector,” said Wang Zhenhua, chairman of Future Land, during the company’s annual results briefing in Hong Kong on Monday.

Dozens of Chinese cities have announced measures in recent months – including restrictions on buyers who already own a home and minimum down payment requirements – to curb the price escalation that has plagued the market.

China property developers cut new home prices in compliance with government curbs designed to cool market

Future Land announced on Monday that its net profit rose 34 per cent year-on-year to 1.38 billion yuan (US$200 million) in 2016, driven by strong sales.

Core earnings, excluding one-off items and fair value changes, jumped 60 per cent to 1.16 billion yuan. The company ’s revenue also increased by 18 per cent to 28 billion yuan.

During the period, Future Land’s gross margin ratio improved to 23.4 per cent from the previous 20.4 per cent. The board decided to pay a final dividend of 0.05 yuan per share, unchanged from 2015.

The company’s shares dropped 6.2 per cent to HK$1.97 by Monday’s close in Hong Kong after shooting up 25 per cent since the beginning of the year.

After achieving contracted sales of 65 billion yuan last year, Future Land has set 2017’s sales target at 85 billion yuan, a 30 per cent increase.

Probably we will complete buying a land site or a financial firm in Hong Kong in the first half
Kenny Chan, executive director, Future Land

To hedge against yuan depreciation risks, the developer said at the press conference that it is actively seeking property development opportunities in Hong Kong and the US.

Besides its core business, Future Land is also seeking to use its Hong Kong listing platform to test the water for business diversification, especially in the financial sector.

“Probably we will complete buying a land site or a financial firm in Hong Kong in the first half,” said Kenny Chan, executive director and vice president of Future Land.

The company already has a presence in about 30 Chinese cities, with Suzhou, Shanghai, Nanjing, Changzhou contributing the most to its sales.

Wang said sales will be launched in the fourth quarter at Future Land’s project in Shanghai’s Hongkou district. Future Land won the residential plot last July for an average land price of about 67,000 yuan per square metre, setting a new record for the city at the time. The developer has said it planned to sell at 120,000 yuan per square metre.

Although many cities have slowed down or even halted granting sales permits for some high-end properties where the authorities believe prices are too high, Wang is optimistic about the situation in Shanghai. “There are still new homes selling at more than 120,000 yuan per square metre, ” he said.