China property

Aoyuan homes in on southern China’s ‘big bay area’

Developer looking to expand into more cities in China’s booming Pearl River Delta, with ambitious goal of reaching 50bn yuan in annual sales by 2019

PUBLISHED : Wednesday, 22 March, 2017, 6:19am
UPDATED : Wednesday, 22 March, 2017, 6:18am

Developer China Aoyuan Property is looking to expand into more cities in China’s booming Greater Pearl River Delta (PRD), a region covering cities including Shenzhen, Guangzhou and Hong Kong , as it targets an ambitious goal of reaching 50 billion yuan (US$7.2 billion) in annual sales by 2019.

“The delta is our primary focus – after entering Shenzhen and Huizhou last year, we plan to expand into Dongguan and are actively looking for opportunities in Hong Kong too,” said Jacky Chan Ka-yeung, Aoyuan’s vice president.

Chan expects the rise in home prices to continue in the area, given its strong growth in population and diversified industrial clusters, particularly fast-growing hi-tech services.

Chinese Premier Li Keqiang pledged this month to accelerate cross-border integration between Hong Kong, Macau and the mainland’s Guangdong province, creating what he called a “big bay area” which will be as competitive as other comparative overseas areas such as Los Angeles, New York or Tokyo.

Chan said Aoyuan already has a presence in most cities in the delta, and by speeding up its land acquisition in Shenzhen and neighbouring cities such as Huizhou, he predicts greater Shenzhen to contribute 5 billion yuan (US$725 million) in sales to the business this year.

While a number of big cities further tightened home-buying policies over the weekend to cool the market, Chan said Aoyuan is “cautiously positive” about the overall market, as there is still an under-supply of new-homes in China’s first- and leading second-tier cities.

Besides the PRD region, the Guangzhou-based firm is also looking to strengthen its footprint further north in Beijing and in middle and western Chinese cities such as Chengdu and Chongqing, and the Yangtze River Delta, in an effort to become a leading nationwide developer.

The company has set contracted sales target of 33.3 billion yuan for 2017, which would mark a 30 per cent growth from last year’s sales.

Chan said its internal guidance is even “more aggressive,” with the firm aiming to expand sales to 50 billion yuan in the next 2-3 years.

That said, he insists Aoyuan will not overpay for land nor raise its leverage to support growth, as the company is keen to continue improving its ratings.

Fitch, for instance, in December upgraded Aoyuan’s long-term corporate credit rating to “BB-” from “B+” given its improving financial profile.

Aoyuan has also been accelerating its overseas investment in an effort to hedge domestic policy risks and the ongoing depreciation of the yuan.

The developer has five residential projects in Sydney, Australia, and just made its first foray into Canada, this month, acquiring a 90 per cent equity interest in a high-end apartment in Vancouver for C$30.6 million (US$22.95 million).

Chan said those overseas developments are mainly targeted at local buyers.

Its first Australian project, One30 Hyde Park, is already 90 per cent taken up, while its second, Maison 188 Maroubra, is about 80 per cent.

The purchasing power of local Chinese and new immigrants in Australia and Canada is very strong, Chan said.

“Our next step is to build projects in Melbourne and Toronto.”