Top developers to invest more in land this year: survey

Updated 2017-02-14 09:21:46 Global Times/Agencies

Chinese real estate developers surveyed by Reuters mostly plan to increase their land investments in 2017 as they shrug off record prices and government tightening measures while seeking to expand market share.

The 10 companies contacted by phone and messaging represent half of the top 20 Chinese developers and together have close to 0 billion in annual sales, mainly of apartments.

Eight said they are increasing their budgets by 10 percent to 50 percent; the other two said they will keep spending at 2016 levels. Company officials responding to the survey asked for anonymity, many citing corporate quiet periods ahead of quarterly results.

The developers are buying land in first-tier cities, which are Beijing, Shanghai, and Guangzhou and Shenzhen in South China's Guangdong Province, or second-tier cities such as Suzhou in East China's Jiangsu Province.

Most are shunning smaller third- and fourth-tier cities. That could increase the price differential between the major cities, where demand is robust and land is in short supply, and the rest.

Increasing market share helps the big players to gain more economies of scale, putting them in a better position to control labor, materials and marketing costs.

The plans for more land buying contrast with expectations for a slowdown in the growth in overall national real estate investment in 2017, compared with a 6.9 percent rise last year. The Chinese Academy of Social Sciences forecasts property investment will rise 5.4 percent in 2017.

Increasing competition for land in major cities will not only pose a challenge to authorities who want to avoid property prices from soaring out of control, but also put pressure on companies' profit margins.

China's property market, which contributes around 15 percent of the country's economic growth, has become increasingly unbalanced, with higher tier cities recording record prices while smaller ones struggle to reduce inventories.

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