China's real estate sector has ups, downs
By Jia Hepeng (China Business Weekly)
Updated: 2004-05-26 09:20

The figures are compelling: 88 of China's top real estate developers in 1994 no longer crack the Top 100 list.

Those firms have been shoved aside -- some have gone bankrupt -- by upstarts over the past 10 years,which reveals the stark reality of China's booming real estate sector.

A mere 12 real estate developers have been able to stay on the list, considered an honour roll by the industry, since 1994, indicate findings in a study conducted by researchers from Soufun.com Academy, Tsinghua University's Real Estate Institute and the Institute of Enterprises under the Development Research Centre of the State Council.

Soufun.com is the largest real estate portal in China, and Soufun.com Academy is its research department.

Ten years ago, all of the top 100 Chinese developers were State-owned enterprises (SOEs). Now, 40 per cent of the firms on the list are SOEs.

Private real estate developers account for 42 per cent of the firms; and Sino-foreign joint ventures, 18 per cent.

The SOEs still on the list are undergoing dramatic reforms, and they have introduced market-oriented management practices.

For example, Beijing Urban Construction Group and Beijing Tianhong Group, two State-owned industry giants, focus on the development of more than 1 million square metres of low-price properties each year.

The major criteria used to rank the top 100 developers were average annual sales volumes between 2001 and 2003, their sales areas and their shares of the market. The threshold sales volume for the top 100 firms is 350 million yuan (US$42.27 million).

The research shows that annual sales volumes of 17 developers of the top 100 surpass 2 billion yuan (US$241.55 million), while the combined annual sales volume of 65 developers was less than 1 billion yuan (US$120.78 million).

That indicates Chinese real estate companies must become stronger and more competitive.

In the past three years, only three developers constructed more than 2 million square metres per year.

The area was equivalent to about three Beijing-based China World Trade Centres.

The individual market shares of top 100 real estate developers are still lower.

For example, neither Shenzhen-based Vanke nor Shanghai-based Lujiazui, the nations top two real estate developers, has grabbed more than 1 per cent, in terms of sales volume and property sales area, of the market.

In comparison, top US real estate contractor and developer Pulte Homes Inc realized US$7.2 billion in sales volume in 2002, which accounted for more than 5 per cent of the US real estate sector.

Pulte Homes' sales volume last year was 13.5 times greater than Vanke's.

Dramatic changes in the rankings of China's top 100 real estate developers were connected to the firms' relatively small business scales and poor market shares, said Zhao Liyi, deputy director of Soufun.com Academy.

China's leading developers, given their relatively poor strength, easily fell off the top 100 list, Zhao added.

China's leading real estate developers are located primarily in North China, centred in Beijing; East China, centred in Shanghai; and South China, centred in Guangzhou and Shenzhen, indicates the research.

Only nine of the top 100 real estate developers are located in western or central China.

Beijing, Shanghai, Guangzhou and their neighbouring communities remain the most active sites for real estate development, while some smaller cities -- including Tianjin, Suzhou, Ningbo and Nanjing -- with good economic figures have shown strong growth potential.

In terms of their developments, 94 of the top 100 developers specialize in housing developments. Three build office buildings and three primarily construct shopping complexes.

The average housing price of property developed by the top 100 developers was 6,171 yuan (US$745.3) per square metre last year. That was 2.69 times greater than the national average.

That indicates China's leading property developers are mainly constructing high-end housing.

Of China's top 100 real estate developers, 45 focus solely on real estate projects while 55 are involved in other industries, including property management, construction and construction materials.

"From the figures, we conclude the most profitable property firms are those that specialize in real estate development," said Liu Hongyu, director of Tsinghua University's Real Estate Institute.

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