The recently-released research report on top 10 listed real estate enterprises in 2017 shows that both the transaction volume and price of house in hot Chinese cities have increased in 2016, the reporter learned from the China Index Research Institute. Listed real estate companies achieved outstanding results in performance, profitability and capital status. However, as financial regulations have been strengthened since in the fourth quarter of 2016, real estate enterprises are faced with pressures on both house demand and capital supply. It becomes inevitable that the industry concentration will accelerate.
In the general, thanks to the hot house market in the first and second-tier cities, the profitability in listed real estate companies has improved significantly.
According to statistics, the average net profit of real estate companies listed in Shanghai and Shenzhen increased 35.33 percent year on year to 1.13 billion yuan. That of Hong Kong increased 11.37 percent year on year to 4.956 billion yuan. The total net profit of mainland real estate companies listed in Hong Kong was about 4 times of those listed in Shanghai and Shenzhen. But the average growth in the net profit of those listed in Shanghai and Shenzhen is 23.96 percentage points higher than those listed in Hong Kong mainly because that some small and medium-sized real estate companies in Shanghai and Shenzhen saw a remarkable increase in investment returns.
However, the report points out that as restrictions on house purchasing and loans continue to increase, house transactions in some hot cities began to slow down, and housing prices are under pressure. As financing environment continues to tighten, listed real estate companies are likely expected to face pressure in sales and capital supply, increasing their operational risk.
Specifically, the report shows that since restrictions on house purchasing and loans have implemented in the fourth quarter of 2016, house transactions in hot cities begun to slow down. House prices will also face downward pressure. High-priced land plot, if cannot be sold at a premium or wait to sale later, will bring more Big risk.
The report points out that as the payment period approaches and financing policies are tightening, listed companies with high capital leverage, debt pressure and concentration of expensive land, as well as high demand for capital are likely to face the risk of shortage of funds. In addition, some small and medium-sized listed real estate companies will also face large financial risk as they only make investment in cities, especially in cities with bad house sales or third- and fourth-tire cities. As financial supervision has been strengthened since the fourth quarter of 2016, fund supply continued to narrow and capital risk will increase in the future.
In this case, the report believes that the restructuring in the whole real estate industry has accelerated in 2017, and the divergence among listed real estate companies has intensified.
"In the first quarter of 2017, the market share of large-scale real estate companies jumped sharply. At the same time, small and medium-sized housing enterprises are struggling to survive or leave their market In 2017, under both pressure on demand and capital supply, it becomes inevitable that the industry concentration will accelerate,” the report says.
Translated by Coral Zhong
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