Yu Liang says there is opportunity in small cities. Photo: Paul Yeung

China Vanke targets small Chinese cities as rivals pull out

Top mainland developer wary of high prices in big towns even as it boosts profit to a record

China Vanke, the mainland's largest developer by revenue, will buy land evenly across the nation, in sharp contrast to rivals which are bypassing small cities, company president Yu Liang said yesterday.

The developer reported a 20.5 per cent rise in net profit last year to 15.1 billion yuan (HK$19.1 billion), after contracted sales hit a record 170.9 billion yuan.

Return on equity remained unchanged at a record 19.66 per cent.

Yu said land prices in tier-1 cities were at a high, "against which we need to raise our guard".

"But no one is going to third-tier cities, which we think is an opportunity," he said.

Yu said he was not worried about the housing market in the next 15 years because urbanisation and the relaxation of the one-child policy would drive up demand.

However, he warned of short-term oversupply in some cities, where destocking would take 12 months.

"The negative result is that it is getting harder to sell homes," Yu said. "The positive side is that home price increases will ease and we don't have to worry about further tightening measures from the government."

He said he expected home prices would stabilise this year, adding that he saw room for the company to increase its investment abroad, although it had no immediate plan for acquisitions to speed up expansion.

Vanke last year announced a joint venture with real estate firm Tishman Speyer to build condominiums in San Francisco.

It also teamed up with US developers RFR and Hines to build apartments in New York this year.

"First, we want to learn [from our partners]," Yu said, adding that Vanke would eventually like to invite its foreign partners to take part in projects in China.

"A by-product is that we can offer rich families barred from the domestic housing market an investment option."

This article appeared in the South China Morning Post print edition as: China Vanke targets smallcities as rivals pull out