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According to a recent study by private researcher CRIES, Chinese real estate companies have scaled back their expenditures on land by 10% in the first half of this year compared to the previous year. This reduction in spending reflects a lack of confidence in the real estate sector and the overall weakness in the broader economy, as property sales have remained stagnant.
In the month of June, property sales saw an even steeper decline compared to May, with a drop of 29.4% compared to the same period last year. Adjusting for seasonal factors, the decline comes in at around 19%. The study conducted by CREIS focused specifically on the top 100 property developers in China in terms of sales and land acquisitions.
The real estate industry in China has faced significant challenges stemming from a debt crisis that began in mid-2021. This crisis has resulted in numerous corporate defaults and a decline in buyer confidence, which has been further worsened by a deteriorating economic outlook. Although local governments have implemented several measures to bolster the real estate sector, investor sentiment remains fragile.
According to CREIS, the total sales value of the top 100 developers saw only a marginal year-on-year growth of 0.1% in the first six months, amounting to 3.6 trillion yuan ($496.67 billion). State-backed developers predominantly dominated the league table. Poly Developments and Holdings emerged as the top seller of homes, closely followed by China Vanke. Country Garden, a privately-owned developer, slipped to the fifth position from its top rank last year.
In addition to changes in rankings, many developers have also downsized. Compared to the year when the debt crisis unfolded, the number of companies with sales exceeding 100 billion yuan decreased from 19 to 7, while those surpassing 10 billion yuan dropped from 132 to 78. Among the top ten buyers, Hangzhou Binjiang Real Estate Group and Longfor Group were the only private developers.
Despite these challenges, the CREIS predicts a slight increase in sales for the full year, primarily due to a low base in 2022.
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