Yu Liang seems to enjoy chairing China Vanke these days
Property sales by China’s top three developers slid in the first two months of 2019 compared to the same period last year as the companies brace for an uncertain year ahead.
Vanke, China’s second-largest real estate developer in 2018 in terms of contracted sales, said in a statement on March 4 that it had signed new contracts worth RMB 43.19 billion in February, down 12 percent from the previous month.
For the first two months of 2019, the Shenzhen-based company clocked a total of RMB 92.07 billion in sales by contract value, covering 5.64 million square metres, Vanke said in its sales brief.
Top Tier Builders Not Exempt From Downturn
On the same day that Vanke made its announcement, its rivals at China Evergrande Group released their sales data for January and February. The home builder, which also hails from Shenzhen, sold RMB 64.7 billion in the first two months of 2019, representing a year-on-year decrease of 42.5 percent.
Country Garden, China’s number one property developer by sales in 2018, also showed signs of struggle as the Guangzhou-based firm pulled in RMB 101 billion in sales for the months of January and February, down 18.44 percent from the same period of last year, according to local Chinese media reports.
Vanke and Country Garden has been locked in a close race for the title of China’s largest builder by sales. The crown was temporarily reclaimed by Country Garden in January, although Vanke showed signs of improving performance as it widened the sales gap between itself and the industry’s third largest player, Evergrande Group.
Many industry analysts have forecast a slide in property sales this year, continuing a downward trend which began in the second half of 2018. Property developers seem to expect similar results, with major players shifting from the 40 to 50 percent growth predicted for 2018 to targets of 10 to 15 percent expansion in 2019.
Vanke Expands Project Pipeline in Challenging Year
Despite slowing sales, Vanke has quickened its pace of land acquisition. According to its statement, Vanke added 16 parcels in Beijing, Shanghai, Guangzhou, Foshan, Chengdu and Fuzhou to its land bank in the past two months, spending RMB 20.63 billion to acquire the sites.The new acquisitions have given Vanke an additional 2.23 million square metres of land, enough to yield 4.58 million square metres of gross floor area.
Vanke has been expanding its project pipeline this year
Vanke chairman Yu Liang said at an earlier internal briefing that in 2019 the company’s goal is to “tighen its focus, to solidify and uplift the core” in order to ensure the developer’s survival and for it to improve its corporate health in the face of the current macroeconomic uncertainty.
Last week, Evergrande Group, led by its high profile chairman Xu Jiayin, launched an “All Staff Sales” program as a challenging first quarter draws to a close, to encourage its 137,000-strong work force to boost sales performance. Xu also proclaimed that the company would slash 10 percent off the price of residential and office properties currently on sale as well as taking 20 percent off the asking rates for retail shops.
Evergrande had previously revealed that its sales target for 2019 is RMB 600 billion.
China’s largest property developer Country Garden has taken its own steps to ensure its financial health, with the company having implemented a large-scale “personnel adjustment” right after the Chinese New Year holiday. On February 20, the company managed by chairman Yang Guoqiang called a group-wide “structural adjustment” meeting, with nine divisions including the corporate office, cost control center, procurement, digital management and overseas business facing cutbacks.
Cheng Guangyu, deputy director at Country Garden, told the media that the company remains confident in its growth even in a bearish market. Cheng stressed that Country Garden would not stop expanding, while stressing that it would continue to seek ways to drive revenue while managing market expectations.
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