Top Chinese developers tighten grip on housing market despite overall slowdown

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.

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.