China’s largest real estate developer, Vanke announced last week that it sold 57 percent more homes in March 2012 than in the same month last year. And during the same week, number two developer, Poly Real Estate trumpeted that its 2011 profits (for the year that ended March 31st) were up 30% compared to the previous year.
But these guys are worried.
And they have reason for concern, because there is a number bigger than their profit figures or sales achievements, and that is the 2.98 billion square metres of housing currently being built in China. Essentially, that is enough to provide 2 sqm metres for every man, woman and child in the country, and according to the Wall Street Journal, “enough to satisfy demand for almost the next three years without a single extra apartment being built.”
I would be a bit distressed myself.
Admittedly, it is tough to cut through the thicket of statistics and earnings reports to find out what is really going on in China’s real estate sector, but there are some basic level indicators which provide an impression of what developers really think, aside from their pronouncements when it’s time to produce an earnings report.
The most direct indicator of what developers are thinking should be land sales — how hard are these guys competing to secure the sites that ensure their ability to roll out new projects. At least in Shanghai, the answer is that their interest in acquiring new land is 80 percent lower than it was a year ago.
Except for deals for public use, sales of land parcels in Shanghai totaled RMB 6.82 billion between January and March this year, 80 percent less than the same period in 2011 and 79 percent off of the amount sold in the fourth quarter of 2011, according to data released by Soufun.com.
In terms of area, about 956,000 square meters of land were sold across the city during the first three months, a 74 percent decrease on an annual basis and a 61 percent quarter-on-quarter drop, the Soufun data showed.
And just in case you are still not convinced that the crunch is on for China’s real estate developers, Forbes China recently released figures on charitable giving by China’s uber-rich, and although tycoon Hui Ka Yan of Evergrande Real Estate topped the list, overall giving by China’s 100 top philanthropists plunged by 41% from 2010 to 2011 with total gifts amounting to RMB 4.79 billion.
So if the developers are holding onto their cash, maybe you should too.