Guangzhou favoured market for Times Property chief Shum Chiu-hung
Shum Chiu-hung prefers to focus on Guangzhou, which accounts for more than half of Times Property's sales, even as other developers diversify their geographical reach
While other mainland developers are trying to diversify, Times Property Holdings' founder Shum Chiu-hung wants his company to focus on what it is doing now and dig deeper in existing markets.
Last year, its home base of Guangzhou accounted for 52 per cent of its 15.2 billion yuan (HK$18.8 billion) in contracted sales. The other cities Times Property operates in include Foshan, Zhuhai, Zhongshan and Qingyuan in Guangdong province, as well as Changsha in Hunan province.
What is your view about the housing market in Guangzhou?
Guangzhou is a big market with more than 10 million residents. Home prices there have been largely stable, although some areas experienced a fall. Many developers offered small discounts to boost sales and the pace of destocking was pretty good.
What was your company's destocking ratio last year?
Almost 70 per cent. But the ratio was a bit higher in Guangzhou.
Will the Guangzhou market recover this year, as people expect home purchase restrictions to remain in place?
It will be better than last year as expectations are improving. People were pessimistic last year, worrying that home prices would fall substantially and many developers would face debt crises. But nothing that bad happened.
So sentiment is warming up and home prices will gradually stabilise. Buyers will come back, although they will be more cautious than during the industry's heydays.
When will the recovery happen?
Traditionally, the second quarter will be better in sales. Companies are busy summarising last year's performance during the first quarter and people go on Lunar New Year holiday. The exact timing of a market recovery will depend on key developers' project launches.
We plan to be even quarter by quarter. The second half will probably see more launches.
Currently, policies and liquidity are loose.
Many developers and home buyers are moving abroad. Do you have any plan to do so?
I cannot comment on other companies' strategies. But we do not have any plan to invest abroad. We will continue to focus on the areas we are in now, not excluding further expansion to neighbouring high-growth cities. Guangzhou will remain our core market.
It seems ratings agencies will be concerned if a developer's business is too much concentrated in one region. What do you think?
I am also talking to ratings agencies. Theoretically, a company with expansive geographical outreach scatters its risks, but management difficulties will increase. Such a diversification will require high performance from a management team and their mastery of each local market. Focus on a certain region means we are very familiar with it.
Currently, we still prefer concentration rather than aggressive diversification.
From a policy perspective, many cities are the same, with no big difference. We invest in economically developed regions where consumer spending is very strong. The housing markets in the cities we are in have big potential to increase. We have been growing fast in the past three years.
I am not concerned about any drastic changes in the housing market fundamentals in these cities. Fundamentals are key, while policies are often temporary.
We have seen many changes in such rules as home purchase restrictions. The most important thing is that the long-term growth fundamental is still there.
For example, we saw many developers rush to third-tier cities a few years ago. Now they are all returning to top-tier cities.
We spent a lot of time and effort selecting the cities we have expanded into. There are 22 cities in Guangdong province, but we only picked a few. We entered Changsha as well because of its close links to Guangzhou and Shenzhen by train.
Why are you still not operating in Shenzhen?
We do not exclude going to Shenzhen. It is not a big city [in terms of area] and the market development is constrained by land supply. But we have been watching closely for any possible opportunity.
Have you noticed a recent auction of a land parcel for a redevelopment project called Ludan Village? In contrast with past practice, the government has removed existing residents and cleared up the site.
Practices will be fine-tuned at different times. It is also a learning process for the government as well as market participants. There are no fixed guidelines now regarding urban redevelopment projects.
Despite some hiccups, cities must push ahead with urban redevelopment for more efficient use of land and more sustainable growth. The government is trying to find a better way to do it, including the one you mentioned. However, such a trial does not necessarily represent a long-term trend.