in the first half of the year, the sales of the top 100 real estate companies fell by more than 40% year-on-year, and their profit margins declined. "there are still huge structural opportunities in first- and second-tier cities"
2024-09-09
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in the first half of this year, sales and profits of real estate companies continued to decline, but the decline in performance slowed down month by month; has the real estate industry hit bottom or started to recover?
according to the current views of real estate developers and securities firms, the current real estate market has both risks and opportunities.
recently, with the release of semi-annual results, many real estate companies including china resources land, china overseas land & investment, greenland china, and longfor group have expressed their views. some companies said that the supply of new homes is relatively insufficient and market confidence needs to be restored, while some large-scale companies said that there are currently huge structural opportunities.
regarding the current mid-year performance of real estate companies, dongguan securities concluded that the industry is facing a double decline in sales settlement volume and gross profit margin, and coupled with the impact of asset impairment provisions, its performance has experienced the longest period of continuous losses in history.
according to huafu securities, the sales of existing homes have recovered under the policy easing. since 2023, there has been a clear differentiation in the sales of commercial housing, and the growth rate of existing home sales in the national commercial housing market is significantly better than that of pre-sale homes.
sales of top 100 real estate developers dropped 40% year-on-year
real estate sales data continued to decline in the first half of the year.
according to cric, in the first half of the year, the total sales of the top 100 real estate companies totaled 2,011.6 billion yuan, down 43% year-on-year; the total equity sales amount was 1,470 billion yuan, down 40% year-on-year. during the period, the total trading amount of the top 100 real estate companies was 1,851.8 billion yuan, down 40% year-on-year; the sales of the top 100 central enterprises, local state-owned enterprises, and non-state-owned central enterprises were -31.9%, -42.2%, and -50.1% year-on-year, respectively.
the decline of the top real estate companies was even smaller. according to data from the china index academy, the equity sales amount of the top 20 real estate companies in the first half of 2024 was 935.7 billion yuan, a year-on-year decrease of 33.3%, and the equity sales area was 49.07 million square meters, a year-on-year decrease of 35.6%. the average sales price was 19,070 yuan/square meter, a year-on-year increase of 3.6%.
fortunately, the sales of existing homes have recovered under the policy easing. according to huafu securities, since 2023, the sales of commercial housing have been clearly differentiated.the sales growth rate of existing homes in the national commercial housing market is significantly better than that of pre-sale homeson the one hand, what you see is what you get for existing properties, which avoids the delivery risk of pre-sale properties; on the other hand, in an environment where housing price expectations are uncertain, the risk of locking in the price in advance when buying pre-sale properties is high. as of july 2024, among the commercial housing sales area nationwide, existing housing sales accounted for 160 million square meters, and pre-sale housing sales accounted for 380 million square meters.existing housing sales account for more than 30% of the national commercial housing sales。
tianfeng securities said in a research report that in the first half of the year, benefiting from the active efforts of the policy side to stimulate demand, the decline in real estate companies' performance slowed down month by month, but the industry has not changed the bottoming trend, and most real estate companies are still facing great pressure to collect payments. the real estate companies whose sales amount growth rate in the first half of the year was significantly better than that of their peers (the cumulative year-on-year decline was less than 30%) were mainly state-owned enterprises, including poly development, china overseas land & investment, china resources land, greentown china, china railway construction, poly real estate, joy city holdings, hong kong land, galaxy real estate, shenzhen metro real estate, etc.
real estate companies' profits are under pressure
according to the semi-annual report data of 113 a-share listed real estate companies compiled by tianfeng securities, the gross profit margin of the sample real estate companies was 14.78%, down 2.75 percentage points from the same period last year. in terms of gradient, the gross profit margins of large, medium and small real estate companies were 12.87%, 17.08% and 14.59% respectively, down 7.05, 0.10 and -0.41 percentage points respectively compared with the same period last year.
according to statistics from kaiyuan securities, among the top real estate companies, only china resources land, china overseas land & investment, sunac china holdings and longfor group had gross profit margins exceeding 20%. only sunac china holdings and greenland holdings achieved year-on-year growth in gross profit margins. the gross profit margins of vanke a, binjiang group, gemdale group and poly developments fell by more than 5 percentage points. most real estate companies are still under pressure from a decline in carried-over gross profit margins.
taking the "profit king" china overseas development as an example, in the first half of this year, the company achieved a gross profit of 19.178 billion yuan, a year-on-year decrease of 4.85%; the gross profit margin was 22.06%, compared with 22.61% in the same period last year. according to wind data, from 2015 to date, china overseas development has had five years with a mid-term gross profit margin exceeding 30%, namely 2015 and from 2017 to 2020. the mid-term gross profit margins in 2016 and 2021 did not reach 30% but exceeded 25%.
in the first half of the year, china resources land achieved a gross profit of approximately rmb 17.63 billion, with a comprehensive gross profit margin of 22.3%, of which the gross profit margin of development and sales business was 12.4%.
regarding the gross profit issue, guo guanghui, vice president of china overseas development, said at the mid-term performance communication meeting that with the market continuing to adjust, market price fluctuations have caused great trouble to real estate companies' profit margins, which have all declined to varying degrees.
geng zhongqiang, executive president of greentown china, also said that the gross profit margin in the first half of the year was basically the same as the level of the whole year last year, which was at a relatively low level. for the whole year of 2024, the gross profit margin is still affected by the income structure and the clearance of key and difficult inventory. the gross profit margin is still facing certain pressure and is expected to be slightly lower than last year, basically at the bottom. with the gradual delivery of projects acquired in 2022 and 2023, the future gross profit margin will improve.
regarding the decline in profits, tianfeng securities said that in the first half of the year, the downward trend in gross profit margins in the real estate industry continued, and it will take time for the industry's profit margin to turn around. the decline in gross profit margins of large real estate companies may be mainly due to the fact that they adopted a "price-for-volume" approach to maintain their market share, which affected the carry-over profit margin. at the same time, the high land prices 22 years ago may still be a drag.
founder securities analyzed that after 2021, the consensus on real estate companies' investment will shift to living within their means, and land acquisition will focus on core sectors. the sales of high-quality projects will be guaranteed, and the profit margin will be relatively certain. as high-gross-profit projects are gradually transferred over, the sector's gross profit margin level is expected to gradually return to 20%+ starting from 2025.
real estatemarket confidence needs to be restored
is the real estate correction coming to an end? what will be the future trend?
yu liang, chairman of vanke's board of directors, said that in the medium and long term, potential housing demand has passed its historical peak, but the absolute scale is still huge; in the short term, after three years of adjustment, the cost-effectiveness of new houses is improving, and policy support for diversified housing needs is also increasing. these are accumulating energy for the recovery of market demand and providing soil for the arrival of a new development stage in the industry.
in yu liang's view, from the supply side, the supply of new houses is relatively insufficient. the area of new residential construction this year has dropped by 24% year-on-year. according to this trend, the annual supply is expected to be around 500 million square meters. even compared with some countries with mature urbanization, the current supply level is still low. the improvement of the supply and demand relationship has provided conditions for the market to get out of the trough and regain upward momentum.
gemdale group said that the real estate industry is facing a development trend of slowing overall growth. in the medium and long term, the real estate industry will remain an important pillar industry, and there is still a large amount of improvement demand and urbanization demand to support the development of the industry.
zhang xuzhong, executive director of longfor group and president of real estate channel, said that the policy level continued to relax in the first half of this year. after the "517" new policy, the market sales increased significantly in june, but fell back in july. the overall performance of the second-hand housing market was slightly better than that of the new housing market. the scale decreased slightly year-on-year, but the price drop was relatively large. at present, the market is still in a stage of volume and price adjustment, and market confidence needs to be restored.
yan jianguo, chairman of the board of directors of china overseas development, said in the announcement that market uncertainty has further increased in the first half of the year. in the future, the domestic economy and real estate market will still face multiple pressures and challenges.
“there are still huge structural opportunities in first- and second-tier cities”
what should we do in the future? judging from the statements of various real estate companies, the safety of projects in first-tier and second-tier cities has become a consensus.
longfor group's chief financial officer zhao yi said that the market will continue to recover slowly amid fluctuations in the second half of the year. the group will flexibly adjust the pace of launching new projects based on market conditions, adhere to project classification management, focus on inventory clearance, and drive cash flow recovery and profit achievement.
yan jianguo said that although the supply and demand relationship of real estate has undergone major changes, the residential market as a whole has entered the stock market.however, there are still huge structural opportunities in first- and second-tier mainstream cities.the group has ample financial space to cope with the risks of market fluctuations and has substantial resources to seize opportunities of market adjustments.
geng zhongqiang, executive president of greentown china, also said,in terms of land acquisition strategy, the company focuses on first-tier or strong second-tier cities.the land-to-goods ratio in these cities is relatively high, which to some extent results in relatively low gross profit margins. however, these areas have high security and risk resistance for projects, which ensures the survival and development of the company in the current downturn of the industry.
guo jiafeng, ceo of greenland china, also said that this year's investment work is much more difficult than last year. in terms of city selection, although the company is still optimistic about high-level first- and second-tier cities and even core areas, many new problems have emerged this year. for example, the markets in shanghai and beijing are very differentiated.
shui on land chairman vincent lo also said: "the chinese real estate market is undergoing structural adjustments and has not yet seen a clear recovery. therefore, we will adopt a more prudent attitude in selecting investment and development opportunities.in the future, the group's business will continue to focus on first-tier cities in the yangtze river delta and the greater bay area., especially shanghai.”
for the second half of the year, poly development said it will actively seize policy opportunities. the third plenary session of the 20th cpc central committee proposed "giving all city governments full autonomy in regulating the real estate market, taking measures based on the city, and allowing relevant cities to cancel or reduce housing purchase restrictions and cancel the standards for ordinary and non-ordinary residential properties", which reflects the current central government's attention to the industry, opens up policy space for the stable development of the industry, and also lays the foundation for preventing and defusing industry risks, stabilizing consumer expectations, and promoting a virtuous cycle and healthy development of the market.
the paper reporter pang jingtao
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