As of December 5 closing time, nine real estate companies, including China Evergrande Group (03333.HK) and China Vanke Co., Ltd. (000002.SZ), announced their sales performance in the first 11 months of 2017. Their sales volume recorded an average growth of 50 percent over the same period of last year. CITIC Securities notes in a research report that the sales volume in the first 11 months beats expectations, mainly because that leading real estate companies have advantages in capital and centralized procurement. Land sellers more favor large companies. Their profitability is expected to maintain a high level. With more policy regulations, leading companies show further advantages.
Leading real estate companies hit record in sales
On the whole, the total sales volume of the nine real estate companies reported 1,539.5 billion yuan. Compared to the first 11 months of 2016, the sales volume increased by 500 billion yuan, an increase of 50 percent. For example, China Vanke announced on the evening of December 4 that it achieved contract sales area of 2,296,000 square meters in November 2017, with a sales amount of 34.75 billion yuan. During the January-November period, it achieved contract sales area of 31.419 million square meters, with a sales amount of 467.65 billion yuan, up 37 percent from the same period last year.
Zhang Dawei, chief analyst with Centaline Property, claims that in the first 11 months of 2017, China Evergrande and China Vanke have achieved a sales volume over 400 billion yuan, respectively, while the sales volume of Sunac China Holdings Limited (01918.HK) approaches 300 billion yuan. The sales volume of Future Land Holdings Co., Ltd. (601155.SH) exceeds 100 billion yuan for the first time. Real estate leaders, making historical records, have far exceeded the average growth of the whole industry.
It is a foregone conclusion that enterprises having announced sales performance will set new records in 2017. Zhang claims that in the first 11 months of 2017, benchmarking house developers have fully completed their annual tasks, and nearly all of them have done better job than they did in 2016. It is expected that total sales volume of house developers in 2017 will reach a new high.
It is noteworthy that though leading real estate companies achieve outstanding annual sales performance, polarization is still apparent in the industry and concentration ratio further increases. Centaline Property holds that over 15 real estate developers will report a sales volume over 100 billion yuan in 2017, and real estate developers might gain their best harvest ever. But in the meantime, several listed real estate companies focusing on core cities see their operating revenue and profit rate both declined, especially in cities like Beijing and Shanghai where regulations are tougher. For these companies, the market in 2017 is hardly optimistic.
Both quantity and price of land procurement rise
Industry insiders claim that housing regulations get tougher in first-tier cities, while policies in second/third-tier cities are relatively ease in the first half, and it is easier for land procurement too. Many large-scale house developers are keen on procuring land in non-first-tier cities, and that is an important reason behind the sales improvement. House developers are still enthusiastic about land procurement in spite of heightening regulation. Increasing cash flow and decreasing financing cost are edged tools against downward risks.
According to statistics made by China Securities Journal, procured land of house developers having unveiled relevant information is around 200 percent that of the same period in 2016. Wind data shows that as of Dec. 5, 64 house developers totally procured 130 million square meters of land, and three house developers procured over 10 million square meters of land. To be specific, Country Garden Holdings Co. Ltd. (02007.HK), China Evergrande and China Vanke procured land of 23.156 million square meters, 14.115 million square meters and 13.3028 million square meters, respectively. Top 15 house developers, in terms of the amount of procured land, take up 76.58 percent of all land being procured.
The number of land being procured also increases greatly. Wind data shows that 64 house developers totally procured 2,351 pieces of land, while data in the same period is 62 house developers and 1,310 pieces of land. Six house developers have procured over 100 pieces of land since 2017. Country Garden, China Vanke, China Evergrande, Poly Real Estate Group Co., Ltd. (600048.SH), China Fortune Land Development Co., Ltd. (600340.SH) and RiseSun Real Estate Development Co., Ltd. (002146.SZ) procured 418 pieces, 231 pieces, 200 pieces, 145 pieces, 121 pieces and 102 pieces of land since 2017.
The phenomenon is also evidenced by statistics from Centaline Property Research Center. As of November 2017, the most active 50 house developers totally procured land with 2,098.2 billion yuan, increasing by 53 percent from 1,372 billion yuan recorded in the same period of 2016. 58 house developers have procured land with over 10 billion yuan since 2017, while in the same period of 2016, the number only reported 40. In addition, as of November 2017, 30 house developers procured land with over 20 billion yuan, a big increase when compared with the situation in the same period of 2016.
A housing analyst told China Securities Journal that on the whole, leading real estate enterprises procured more land this year than ever. There are mainly two reasons for that. Firstly, improving industrial concentration ratio makes it hard for small house developers to procure land. Secondly, tightening policies makes leading enterprises have stronger awareness of unexpected things. Many enterprises expect stricter policies in the future, so they prefer moving faster in land procurement now.
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