China’s housing crisis showed no signs of abating in the first three months of the year, as the value of new home sales by the country’s largest property developers slumped to roughly half the figure from a year earlier.
In aggregate, China’s 100 largest builders sold RMB 779 billion worth of new homes in the first quarter, representing a 47.5 percent drop from the same period in 2023 and showing little improvement from the the 48.8 percent year-on-year decline in the first two months of the year, according to preliminary data from China Real Estate Information Corporation (CRIC) published on Sunday.
The continued slide came despite a series of support measures implemented in January by central and local authorities, including loosening home purchase restrictions and boosting lending to the sector. For the month of March, new home sales slid 45.8 percent from a year prior to RMB 358 billion, following a 60.0 percent year-on-year decline in February.
“In the short to medium term, the overall market direction is unclear, and there are still various uncertainties in the operating environment. It is expected that market supply and demand will not pick up significantly in the short term, and corporate sales will continue to face greater pressure,” according to a translated statement from CRIC.
Continued Weakness Expected
Despite a 92 percent month-on-month increase from February, new home sales in March were still below the monthly average in the third and fourth quarters of last year and marked the weakest March transaction volume in the last five years, with CRIC predicting the sluggish trajectory to continue this month.
“Forecasting April, we believe that the total transaction volume may continue the weak recovery trend, and the absolute volume will be the same as in March or slightly increase. However, based on the high base last year, the year-on-year downward trend will continue,” said CRIC. March was the tenth straight month of declining homes sales in China, according to the organisation’s figures.
The top 10 developers collectively sold 51.9 percent of homes by value in the first quarter, with state-backed builders accounting for eight of those leading players.
Poly Developments, China Overseas Land & Investment, and China Vanke notched the most sales in the period with respective sales of RMB 57.9 billion, RMB 57.2 billion, and RMB 54.1 billion, while Greentown China and China Resources Land rounded out the top five with RMB 53.2 billion and RMB 45.6 billion of home sales respectively.
China Merchants Property, C&D Real Estate, Longfor Properties, Binjiang Real Estate, and Huafa Properties rounded out the top 10 developers.
CRIC noted that 90 of the top 100 developers saw year-on-year drops in sales value, both for the month of March alone as well as for the first quarter, with 52 of the 100 builders recording sales declines of more than 50 percent year-on-year in March. In the first quarter, only 16 of the top 100 developers had sales of RMB 10 billion, compared with 34 reaching that benchmark during the same period in 2023 and 40 in the same period in 2022.
Losses and Downgrades
The torrent of defaults by top developers such as China Evergrande has shaken the confidence of Chinese homebuyers, causing analysts to predict still slower sales for developers this year.
“We have cut our forecasts for China’s housing market, and now expect a 5 percent to 10 percent fall in new home sales in 2024, amid the persistent slump in new housing demand,” Fitch said in an update on Thursday.
Last week, Country Garden, China’s largest private property developer, delayed publication of its 2023 financial results, citing the need to collect more information to make appropriate accounting estimates and judgments.
Country Garden’s postponement came as at least 27 HKEX-listed mainland developers announced 2023 financial results last week, with 19 of those builders reporting losses totalling a collective RMB 191 billion. A majority of the builders which managed to maintain profitability saw their bottom lines plunge.
Shenzhen-based China Vanke, China’s second largest builder by sales last year according to CRIC, saw its 2023 net profit slide 46 percent to RMB 12.1 billion, according to the company’s results announced last Thursday. Earlier this month, Moody’s, S&P and Fitch all downgraded their credit ratings for Vanke amid concerns over plunging revenue, access to funding and weakened liquidity.
Among last year’s loss-making developers, Sino-Ocean Group, Shimao Group, R&F Properties and Kaisa Group took the biggest hits to their bottom lines with losses of around RMB 20 billion each, while KWG Group doubled its 2022 loss to RMB 18.7 billion.
Agile Property, China Aoyuan, CIFI Holdings, Sunac China, Logan Group, Fantasia Holdings, Glorious Property, Zhenro Properties and Overseas Chinese Town (Asia) all remained unprofitable in 2023, building on losses in 2022, while China Jinmao, Soho China, Powerlong Real Estate, China South City Holdings and China SCE Property swung into the red last year.
State-backed China Resources Land and China Overseas Land & Investment (COLI) outperformed their private peers, with China Resources Land boosting its 2023 net profit 11.7 percent to RMB 31.4 billion, while COLI grew its bottom line by 10.1 percent to RMB 25.6 billion over the same period.
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