16 February 2019
The top 10 developers are expected to control 40 percent of China’s home market over the long run compared with10 percent at present. Photo: Bloomberg
The top 10 developers are expected to control 40 percent of China’s home market over the long run compared with10 percent at present. Photo: Bloomberg

China property tycoons share their market outlook

China’s 100-city home price index surged nearly 30 percent between January 2015 and October 2016, with first-tier cities like Shenzhen, Shanghai and Beijing posting even higher price growth as people kept rushing into the market.

That prompted the central government to order 19 major cities where home speculation has been rampant to stem the surge or local government officials could be in trouble.

Various tightening measures have been rolled out, such as home purchase restrictions and stricter rules on mortgage loans.

Others prohibit residents from buying a second or third home. The minimum down payment ratio for first-home buyers has been raised to 35 percent.

Some cities have capped home price growth at 10 percent compared with the average price or projects launched last year in the same districts.

Some have even set an absolute ceiling for new offerings.

However, according to November figures released by Chinese property developers, sales remain strong, little affected by the tightening measures.

Big players such as Vanke (02202.HK) Evergrande (03333.HK), Sunac and other leading Chinese developers managed to maintain robust sales last month.

Some developers even reported stronger sales compared with the level before cooling measures were introduced.

Vanke founder Wang Shi, Sunac China Holdings boss Sun Hongbin and outspoken property tycoon Ren Zhiqiang have made comments on how they view China’s housing market going forward.

While Wang applauded the government’s tightening moves, Ren attributed the price surge to land supply shortage and said it cannot be solved simply by suppressing demand.

They agreed on a few key points.

First is that chronic supply demand imbalance is set to continue amid excess liquidity, meaning there is too much money chasing too few properties.

Second, given a very different supply-demand situation, geographic diversity will remain a key feature of China’s property market.

For example, housing prices in Shenzhen and Shanghai have already reached 60,000 yuan per square meter while prices in second-tier cities such as Chongqing, Changsha and Xi’an are about 7,000 yuan per square meter.

Third, big developers will get bigger as they force smaller rivals out of the market or simply gobble them up.

Wang expects Vanke’s annual sales revenue to hit 1 trillion yuan (US$145.3 billion) within six years from 200 billion yuan now.

“The top 10 players will reach annual sales revenue of 400 billion yuan on average,” Sunac’s Sun said.

This article appeared in the Hong Kong Economic Journal on Dec. 7

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist

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