Chinese property firms push brand recognition to give themselves edge
Having a big name gives firms pricing power and helps them buy rivals, the main way to grow
Mainland developers are ploughing more effort and money into strengthening brand names as part of a strategy to sharpen their competitive edge when industry consolidation intensifies.
Mainland property sales exceeded 7 trillion yuan (HK$8.9 trillion) last year. Sales growth is expected to slow now that almost all families own at least one home. This means that only the stronger developers will survive by taking over smaller rivals and thereby increasing their market share.
"A strong brand name will increase the chances of success, as it will not only help attract more homebuyers but also enable developers to cut costs by winning the trust of suppliers and lenders," said Zhu Yiming, a Shanghai-based analyst with the mainland's leading private real estate consultancy, CRIC.
Mainland banks lend only to developers on their own confidential lists, which include industry leaders and state-owned homebuilders.
The case of developer Greentown China demonstrates the advantages of having a strong brand. The Hangzhou-headquartered developer was caught in a policy-induced industry downturn and faced cash flow difficulties until Wharf Holdings became a strategic investor in June 2012 by offering a capital lifeline of over 4 billion yuan.
"Over the years, Greentown China has built up one of the most valuable brands in the property market in the PRC," said Wharf in a statement announcing the deal, adding that Greentown was the No1 for "residents' overall satisfaction" in 2011. It kept that award in 2012 and 2013 in the same branding report released by the China Index Academy (CIA), the mainland's top real estate consultancy.