In December 2018, a Chinese real estate media published the 2018 Top 200 Annual Sales of China Real Estate Developers. The analysis showed that despite the regulations served by the Chinese government on local sales and land holding, the ‘benchmarking’ Chinese property developers still achieved phenomenal growth in sales.
Each of the top 10 property developers on the report reached ¥200 billion RMB in annual sales, equivalent to $40 billion AUD in 2018. The top 30 developers all achieved sales over ¥100 billion RMB, equivalent to $20 billion AUD.
Out of all developers, the Evergrande Group ranked top of the list, exceeding ¥500 billion RMB in sales, equivalent to $100 billion AUD. Evergrande is a public company listed on the Hong Kong Stock Exchange with an asset base of more than ¥1.5 trillion RMB, equivalent to $300 billion AUD.
Similar to the Australian property industry, the Chinese property market also declined since June 2018. The report demonstrates that the month-to-month growth rate of the top 100 property developers has dropped from nearly 60% in July to approximately 21% as of December.
However, the cumulative growth rate of the top property developers remained at a high level throughout the year, with the top 100 property developers achieving an average annual growth of 35%.
Those that are also developing in Australia, USA and UK, for example Country Garden, Vanke, Evergrande Group, Sunac Group, Poly Group and many Chinese property developers continued to dominate the Chinese market, with more than 90% of them reaching targets on time in 2018, in which Jinke Group, Yango Group, Shimao Group, Seazen Group, Powerlong Real Estate, CR Land and Aoyuan Group all reached their annual targets by November.
Among them, Jinke Group achieved total sales revenue of ¥129.11 billion RMB in 2018, surpassing their own expectations by 161.4%. Jinke is a public company listed on the Shenzhen Stock Exchange with a market capitalisation of over ¥30 billion RMB, equivalent to $6 billion AUD, and has become a new member of the ‘100-billion club’ in 2018.
“Whether the annual target can be met is a test for every Chinese property developer, especially in 2018 when the overall growth rate of the property market slowed down, and the market expectations continued to decline. Developers need to rely heavily on marketing and branding to win market share. We believe that Chinese property industry will transition from the high-speed growth to a steadier growth in 2019. The top 100 property developers will still be in pursuit of growth, but the growth rate will fall from approximately 40% to 20%~30%.” Said Zhu Yiming, the Senior Analyst at China Real Estate Research Center.
On the whole, Chinese property developers have not and will not stop expanding.
‘’The first tier and second-tier property developers have not slowed down their expansion into the international market, simply because the land acquisition in China and the market demand have both become less favourable to the Chinese developers,’’ says Michael Yang, Chief Executive of GiFang.com, Australia’s #1 property platform for Chinese investors.
‘’In the past, we saw Chinese developers overpaying in Australia due to lack of local knowledge and partnership. That has changed. A lot of Chinese developers are switching their roles to become project funders or in even some cases lenders, which is perhaps a smart move in the current economic and lending environment in Australia.’’
According to Xiuhong Shen, founding director of YiLong Group in Hunan province with an annual sale of ¥28.6 billion ($5.7 billion AUD), the acquisition cost of land in China has experienced more than 200% growth in the last 4 years, while the government is putting on pricing bars on developers so the prices can be ‘affordable’ to buyers.
“Behind the large numbers in sales, very few people are aware of the rapidly decreasing profit margins in property development in China,” Mrs. Shen said, “whereas in UK and Australia the time and process to acquire land is simple and straight forward, and the prices are market-driven.”
Given the market and political causes, it is expected that at least 200 new Chinese developers will enter the international market every year from 2019 as land owners, project funders or lenders to international property developers. The top 4 most popular destinations for Chinese developers are Australia, USA, UK and Canada, with Thailand and Vietnam catching up as preferred destinations for Chinese developers, due to their proximity to China and their popularity to Chinese tourists. An estimated capital of $500 billion AUD is expected to be injected to the international property market by Chinese developers.
2018 might be a phenomenal year for most Chinese developers achieving astronomical sales figures in China, but 2019 could possibly be a milestone for a large number of Chinese developers expanding their footprints outside China, creating an impact in an international arena.