Date
24 October 2017

More developers to join the 100 billion yuan club

Thanks to growing urbanization, rising incomes and a speculative fervor in the market, most property developers in China have attained their full-year sales targets much in advance in 2013.

Combined sales of the nation’s thirty biggest property players reached 1.045 trillion yuan (US$172 billion) as of November, the National Business Daily reported.

In the first eleven months, three players — Vanke (000002.CN), Poly Real Estate (600048.CN) and Greenland Holding — had contracted sales of more than 100 billion yuan. It is believed that at least three more developers will cross that threshold before the year draws to a close.

Country Garden is one of the firms most likely to join the “100 billion yuan club”. The group’s sales more than doubled to 96.7 billion yuan in the eleven months to November. Privately-held Dalian Wanda Group and Evergrande (03333.HK) also have great potential to get into the list.

The increase in the number of jumbo-sized developers means that the industry is becoming more concentrated, which is a sign that the sector is reaching some sort of maturity.

Although sales are hitting new highs, the margins are trending lower due to higher financing and land costs. The average net profit margin of the industry was 17.9 percent in the first nine months of this year, down from the full-year 2012 figure of over 21 percent.

To ensure sustainable profit, developers are trying new things rather than just boosting their scale.

Some have started pursuing higher-quality homes which typically bring better margins. Vanke’s vice president Mao Daqing has said the group will use industrialized building systems to improve the cost efficiency.

– Contact the writer at [email protected]

RC

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