Future Land raises 2016 China sales target by 30 per cent

Future Land Holdings, which bought one of Shanghai’s priciest land parcels last month, said it is expecting to sell 30 per cent more in housing contracts this year as China’s economy shows signs of regaining its growth momentum, while a new Disney resort burnishes the city’s attractiveness for investors.

Housing contract sales, or sales of partially constructed homes, may rise to 52 billion yuan in 2016, 30 per cent higher than an earlier forecast, the Shanghai-listed company said. First-half sales more than doubled to 28.05 billion yuan while net income rose 86 per cent to 852 million yuan, the company said in a statement.

“We believe high-quality homes, particularly in developed cities like Shanghai, will still be well received by homebuyers,” said the company’s vice president Ouyang Jie. “We want to grasp new opportunities to become a bigger and stronger developer.”

The Chinese government has imposed a series of monetary and administrative measures to curb property prices, in policies aimed at making housing affordable to more first-time buyers. Parts of the policy have led to a shortage in land parcels available for construction. That has in turn forced developers to outbid each other during state-run auctions to secure land parcels, leading to record-setting prices known as “land kings”.

Future Land last month paid a record 3.7 billion yuan, or 67,409 yuan per square metre, for a piece of land in Shanghai’s Hongkou district, outbidding more than 10 competitors for the site.

The land site at Liangcheng, the first new land parcel put under hammer in northeastern Hongkou district since early 2015, is near schools and shopping malls and about 40 kilometres away from the Shanghai Disney Resort in Pudong.

Homes built on this site could be priced at more than 120,000 yuan per square metre, valuing a typical apartment of 100 square meters at 12 million yuan.

“The fever on land purchases showed developers are still bullish about the property market in Shanghai,” said Chu Siu-wing, head of Savills Shanghai residential sales. “Shanghai, a densely populated metropolis, has limited fresh land supply, which could eventually propel further rises in land and home prices.”

In the first six months of 2016, Future Land has already paid 7.6 billion yuan for 14 parcels of land totaling 2.67 million square meters in several Chinese cities including Shanghai, Suzhou and Tianjin. The company, a unit of Hong Kong-listed Future Land Development Holdings, is projecting 2020 sales of 100 billion yuan, Ouyang said. That would catapult it to one of China’s top 10 publicly traded real estate developers in sales terms, from the current 19th position.

The company isn’t alone in this scramble for land parcels in prime locations.

Gemdale, one of China’s biggest developers of shopping malls and apartments in China, last month paid 8.8 billion yuan for a plot near Shanghai’s Pudong International Airport, planning to build small homes likely to be sold at more than 60,000 yuan per sq metre.

Future Land said it aims to continue building upmarket homes for affluent residents, even as record land and housing prices have created concerns that the bubble in China’s property market may soon bust. Affluent residents will still be willing to pay premium prices for well-located downtown addresses because these land parcels are in such short supply, especially in cities like Shanghai, Ouyang said.

“Future Land hopes to move upmarket with products that can reflect craftsmanship,” said Ouyang. “Shanghai businesses will be of great importance to the group’s overall performance as we aim to achieve 100 billion yuan sales by 2020.”

The company’s high-end homes will be sold under a new brand called Pu Yue, a Chinese term that means well-crafted jade.