The real estate industry experienced half-year-long favorable policies in 2016, driving a wide growth of annual performance in large-scale real estate companies. Latest data provided by China Index Academy (CIA) shows that so far, 29 real estate companies have unveiled their sales performance in the December of 2016 and the whole year of 2016, and 26 of them overfulfil their annual targets.
Wanda Group reported its performance in 2016 on Jan. 14. Dalian Wanda Commercial Properties achieved 143.02 billion yuan in revenue, or 100.4 percent of target, representing a year-on-year decrease of 25 percent. Dalian Wanda Commercial Properties achieved 112.27 billion yuan in revenue from real estate, or 100 percent of target, and 19.58 billion yuan in rent receipts, or 102.3 percent of target, up 29.6 percent year on year. Wang Jianlin, chairman of Wanda Group, indicated that Dalian Wanda Commercial Properties has succeeded in its shift to the asset-light strategy.
Analyst with property research center CRIC pointed out that while Wanda expands its size, its asset-light model also constantly changes, covering “investment-category Wanda Plazas” and “collaboration-category Wanda Plazas”. The collaboration-category Wanda Plaza model further reduces the company’s capital input and is similar to the deputized construction model adopted by many house projects now. Based on this, Wanda’s asset-light business can move faster, the sales from the company’s real estate sector might keep shrinking, and rent revenues might grow into the main pillar of the company’s real estate business.
For the twelve months ended Dec. 31, 2016, Country Garden, together with its joint ventures and associates, achieved contracted sales of approximately 308.84 billion yuan, representing a year-on-year growth of nearly 120 percent. Cities located in the Pearl River Delta make great contribution to the company’s sales performance. Country Garden founder and chairman Yang Guoqiang indicated that the sales of over 300 billion yuan and the high performance growth achieved by Country Garden in 2016 are closely connected to the large supply of land reserves and rapid turnover. Materials show that Country Garden acquired 149.76 billion yuan new lands with an estimated gross floor area (GFA) of 76.87 million square meters for the first 11 months of 2016, and nearly 20 percent of the newly supplied land comes from third-tier and fourth-tier cities.
In 2016, Sunac China achieved a sales amount of 155.31 billion yuan (among which, the contracted sales value amounted to 150.63 billion yuan, the subscription value amounted to 4.68 billion yuan), and the sold area amounted to approximately 7.582 million square meters, with the average selling price of approximately 20,480 yuan per square meter. In 2016, the attributable sales amount is 106.98 billion yuan (representing a year-on-year increase of 129 percent) and the attributable contracted sales value is 103.96 billion yuan (representing a year-on-year increase of 139 percent).
Sun Hongbin, chairman of Sunac China, indicated on a press conference for its strategic investment in Leshi that “in next 5-10 years, some large-scale enterprises will embrace their diamond age. As the concentration ratio of the industry further increases, big companies will grab the market share of middle- and small-sized ones”. Sun remarked that the real estate industry rapidly expanded from 8 trillion yuan in 2015 to 11.5 trillion yuan in 2016. The industry will maintain its size at around 11 trillion yuan in a long period ahead.
CIA’s vice-president Huang Yu analyzed that 131 real estate developers edged themselves into the list of enterprises valued at 10 billion yuan in 2016, an increase of 27 when compared with the figure in 2015. The sales volume of these companies totals 5.7 trillion yuan and their market share approaches 50 percent. The strong will always be strong, and brand real estate developers will gradually dominate future competition in the real estate market.
Given the trend of industrial growth and the development features of enterprises with different sizes, the CIA estimated that by 2020, 21 companies will reach a size over 100 billion yuan, 6 companies will reach a size over 300 billion yuan, 2 companies will reach a size over 500 billion yuan, and 38 companies will reach a size ranging from 50 billion yuan to 100 billion yuan. The concentration ratio of the industry will rapidly increase in the future.
Huang further analyzed that “based on the performance of real estate developers in 2016, consensus has been reached that attention should be paid to development opportunities in first-tier and second-tier mainstream markets. The top 10 cities contributed nearly 60 percent of the performance recorded by the industry. Meanwhile, brand real estate developers flexibly adjust their product structure according to the demand for improving housing conditions and effectively meet mainstream demand, but great attention should be paid to the risks concerning capital and the realization of inventory in the future”.
Translated by Jennifer Lu