China property

Top Chinese developers tighten grip on housing market despite overall slowdown

Top 10 Chinese developers’ contracted sales reach US$489.5 billion in 2017

PUBLISHED : Tuesday, 02 January, 2018, 5:17pm
UPDATED : Tuesday, 02 January, 2018, 7:24pm

Slowing property sales last year because of the government’s cooling measures helped top Chinese developers to increase their market share at the expense of smaller players and the trend is likely to continue this year as well, analysts say.

Advantages such as easier credit from banks, better access to land bank through regional governments, mergers and acquisitions, and a more diversified portfolio to mitigate sales volatility risk helped leading developers to navigate the sectoral downturn last year, as almost all first and second-tier cities imposed austerity measures not limited to traditional means such as purchasing eligibility restrictions but also new ways like capping selling prices and mandatory holding periods.

“We once again think the market is overly concerned about the macro and has ignored the improvement among developers that has already happened … quite a few of them have been able to get land bank at a reasonable margin, and saleable resources are on a steep uptrend,” J.P. Morgan’s property team led by Ryan Li wrote in a recent report.

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The top 10 Chinese builders’ contracted sales last year jumped 45 per cent over 2016 to hit 3.19 trillion yuan (US$489.5 billion), according to property consultancy Guandian’s annual ranking.

The growth in the value of national residential property sales, however, was 9.9 per cent in the first 11 months of last year, data from the National Bureau of Statistics showed.

The top 10 also increased their market share (of the top 100 developers’ sales) to 43.1 per cent, up from 42.2 per cent in 2016.

Country Garden, based in Foshan, in the southeastern province of Guangdong, overtook Evergrande and China Vanke as China’s biggest developer in terms of contracted sales value, growing 88 per cent to hit 581 billion yuan in 2017, figures from Guandian showed.

Evergrande and China Vanke ranked second and third, with sales exceeding 500 billion yuan each. Sunac China, however, saw the largest sales jump of 132 per cent to be ranked fourth.

A record 17 developers have seen their contracted sales exceeding 100 billion yuan, compared with 12 in 2016 and just seven in 2015. But 2016 was overall a good year for the industry as a whole, as national sales value surged 34.8 per cent.

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According to China Index Academy, an independent property research organisation, the share of the top 10 developers in Beijing grew from 35 to 49 per cent over 2016-17.

In Beijing for example, mid-sized developers did not even get a chance to acquire land as draconian land auction rules forced them to back away, making the market the party of a few.

Credit Suisse forecasted that leading developers’ sale growth in 2018 is likely to increase 27 per cent compared with the 2 per cent growth for national sales.

Meanwhile, the Hang Seng Mainland Property Index surged 109 per cent last year compared with the 25.9 per cent gain of the Hang Sang China Enterprises Index.