China’s top property developers to get bigger amid tightened funding, with mid and small firms forced to sell assets to survive
- Two-thirds of China’s 100,000 property companies will vanish in about 10 years, economist says
- Tightened trust financing to hit medium-sized companies the most, brokerage says
The latest tightening in funding might drive a fresh round of consolidation among mainland Chinese property developers, with an acceleration in acquisition of land and assets by the biggest players, analysts said.
The biggest developers are expected to grow at the expense of smaller rivals, with their performance increasingly deviating from the industry average.
“Foreign investors are too bearish about Chinese developers … they see slower sales and heightened government curbs. But what they may miss is the biggest developers have outperformed the industry average by a wider margin in recent years,” said Edwin Chen, property analyst at Swiss bank UBS.
The consolidation within the industry has been gaining momentum since 2016, but will accelerate thanks to the latest policy and funding headwinds.
Sales growth at the 19 biggest developers tracked by Citic Securities, China’s largest investment bank, beat the industry average by about 10 percentage points in 2011-15 and 23 percentage points in 2016-18. In 2017, a bleak year for developers, the biggest companies beat the average by 38 percentage points.
Huang Qifan, a former mayor of Chongqing and economist, forecast that two-thirds of China’s 100,000 property companies will vanish in about 10 years.
