Sunac China won two residential plots in Shanghai’s most distant district on Monday, agreeing to pay the city government a total of RMB 1.16 billion ($170 million) for the sites on Chongming island, according to an announcement by the Shanghai Land Exchange.
Along with Sunac’s agreement today to buy majority stakes in pair of projects from troubled competitor Sunshine City, the company, which ranked fourth among mainland developers in 2018 by contracted sales has now added just less than RMB 2.5 billion in new projects to its pipeline in the first two days of April.
Sunac ranked as China’s second-most acquisitive buyer of new land during the first three months of 2019, adding to a land bank which, at the end of 2018 was sufficient to build 256 million square metres of projects worth an estimated RMB 3.55 trillion.
Buying a Chongming Housing Site
In Shanghai, Sunac used a subsidiary to acquire two adjacent parcels which make up a combined 112,232 square metres (1.2 million square feet) of the soft alluvial soil of the island formed where the Huangpu river empties into the sea some 75 kilometres north of Shanghai’s urban centre in Jing’An district.
The Hong Kong-listed developer’s acquisition of site 09B-02A for RMB 610 million and site 09A-01A for RMB 545 million gives it the right to build a total of 129, 354 square metres of housing at a cost per square metre of accommodation of RMB 8,929 per square meter for the first site and RMB 8,976 per square metre for its neighbour.
In a sign of minimal competition to Sunac’s land hunger, the 09B-02A site sold for a premium of 0.33 percent above the auction reserve price while its auction-mate fetched a price 0.37 percent above the minimum required bid.
Sunac’s acquisition came about a week after its high-profile chairman Sun Hongbin vowed at the company’s annual general meeting to take a more cautious approach towards land acquisition due to what he termed an ambiguous outlook for property sales.
Sunac Grabs More Land in 2019
Although Sunac’s chairman Sun Hongbin cautioned against aggressive land grabs, the Tianjin-based home builder has hardly slowed its pace of land acquisition. Since the beginning of 2019, Sunac has won more than 10 parcels in cities including Hangzhou, Taiyuan, Shijiazhuang and Qingdao, with a market value of RMB 142.89 billion.
That total does not include the company’s acquisition of a majority stake in a pair of projects in Chongqing’s Nan’an district from Sunshine City, which the Shenzhen-listed developer revealed to the stock exchange on Tuesday morning.
In the western China acquisition, Sunac is paying a combined RMB 1.33 billion to take over an integrated residential, office and retail project, as well as a second purely residential development which together amount to a total of 670,000 of land area.
Property data provider China Index Academy named China Vanke, Sunac China and Greenland Holdings as the top three developers for land acquisition in the first quarter of 2019.
In second place Sunac agreed to spend a total of RMB 30.9 billion during the first quarter to add 6.03 million square metres of land to its reserves.
China Vanke handed over RMB 31.1 billion for 6.02 million square metres and Shanghai’s Greenland Group came up with RMB 22.5 billion to win 7.72 million square metres in the same period.
As of the end of 2018, Sunac declared total land reserves of 256 million square metres, valued at RMB 3.55 trillion. Eighty-five percent of the company’s land is concentrated in China’s first and second tier cities.
Country Garden Slows Down
While Vanke and Sunac – respectively China’s second and fourth largest developers by sales – spent more on land in the first quarter, the country’s number one builder in 2018, Country Garden, invested around RMB 29 billion less on buying land than it had during the same period last year, amid sluggish demand in the smaller cities which have traditionally been its focus.
The Guangdong-based developed spent RMB 7.4 billion acquiring new land in the first three months of 2019, compared to RMB 36.5 billion over the same period in 2018, according to the China Index Academy. The latest figure put Country Garden 24th in the list of the country’s developers ranked by the total value of their land purchases in the quarter.
China Evergrande Group, the sector’s number three player by sales, spent RMB 14.2 billion, roughly the same as it had during the first quarter of last year.
Iris Poon provided fundamental research for this story.