Evergrande Leads China’s Real Estate Winners with 125% Jump in Profit in 2018 1H

China’s top two developers saw their profits grow by at least 50 percent in the first half of the year, according to financial results released this week.

Guangdong-based Country Garden and Shenzhen’s Evergrande, China’s two largest real estate developers in terms of sales, showed strong growth in the first six months of the year. According to financial reports published on Monday, growth in net profit for Evergrande and Country Garden reached 125 percent and 50 percent respectively compared to the same period last year.

The impressive results for China’s top developers come as the largest players increasingly dominate the country’s real estate market, accounting for nearly twice as much of the total home sales during the first five months of 2018 than they had during the same period last year.

Evergrande Rides Growing Sales Volume to Higher Profit

China’s second largest real estate developer Evergrande marked a record-high profit increase with a 125 percent jump in net profit after tax in the first half of 2018, compared to the same period a year ago. The company reported that the net profit from its core real estate business increased by 100 percent over the period, mainly because of lower expenses and an increase in the floor area of properties delivered.

According to the figures released by the company, Evergrande Group’s net profit after tax in the first half of this year came to over RMB 52 billion ($7.6 billion) up from RMB 23.1 billion during the same period last year.

For the company’s core real estate business, profit exceeded RMB 54.6 billion during the period of January to June 2018, compared to RMB 27.3 billion during the first six months of last year.

The Shenzhen-based real estate developer, which has often taken flak for its aggressive borrowing, also announced in the performance report that the company’s net gearing ratio has dropped to below 130 percent by June 30 from 184 percent at the end of last year. According to its most recent annual report, Evergrande was China’s second-most indebted major corporation at the end of 2017.

Top Home-Builder Grows Profit by 50%

While not quite matching Evergrande’s growth rate, 2017’s top-ranked mainland developer in terms of contracted sales, Country Garden, reported a net earnings growth of more than 50 percent in the first half of the year. The developer attributed the increase in profit to the increase in revenue from its property sales, a rise in average selling prices and the improving gross profit margin of its projects.

Another member of Chinese top three real estate developers, China Vanke hasn’t yet published its mid-year performance report. However, earlier this year the developer declared that its net profit for the first quarter of 2018 was RMB 890 million, up by 29 percent from the net profit of RMB 690 million that it made during the same period of last year.

Sunac, Future Land Also Winning in 2018

2018’s good fortune for real estate companies goes beyond Evergrande and Country Garden, to include at least two other players from among 2017’s top ten developers.

Both Sunac China and Future Land Development Holdings have already declared that their net profit for the first half of 2018 would jump by 200 percent compared to the same period last year.

While a growing set of restrictions on housing sales have tamped down the market in many of China’s biggest cities, the real estate industry still reported a steady growth in sales revenue during the first six months of the year. According to the country’s National Bureau of Statistics, sales of real estate in the first half, excepting public housing, amounted to RMB 6.69 trillion ($980 billion), up by 13.2 percent compared to the same period last year. The government figures include sales of commercial and industrial space in addition to housing transactions.

Largest Players Claim 43% of Real Estate Market

While a growing market has brought happy times for the country’s largest developers, not all developers have been enjoying an upswing during the first six months of 2018.

Statistics published by real estate website Fang.com show that the largest players increasingly dominate China’s real estate market, with some 43.1 percent of all sales recorded from January to May this year belonging to China’s top 10 real estate developers, compared to the parallel set of players accounting for only 24.1 percent of sales over the same period of 2017.