2014 Listed Mainland Property Companies' Performance
2014 Listed Mainland Property Companies' Performance is the latest thought leadership issued by Deloitte China Real Estate Industry. The report compares the financial data of 175 property companies listed in Shanghai, Shenzhen and Hong Kong, while in the previous year 176 companies had been analyzed. The property companies selected are mainly engaged in property business in China. Over 50% of their revenue or return on assets (ROA) were derived from property development or investment.
The viewpoints / key findings
According to the study, the total revenue for the period of property companies listed in Shanghai, Shenzhen and Hong Kong continued to maintain a steady growth in 2014, with a growth rate of 14.8%, 13.6% and 7.1% respectively. The performance between 2010 and 2014 of the listed Chinese property companies have been tracked and analysed. The findings show that the overall performance continued to grow. In 2014, the average total revenue over the period of property companies as a whole grew by 10.7% year-on-year. Under the economic slowdown pressure, property companies grew their revenues by adjusting the product structure and positioning as well as the marketing strategies. Specifically, a number of companies turned to increasing inventory absorption capacity and recouping capital rapidly as their operating approach. However, this has directly affected the profits of many companies.
In addition, the average market capitalization as at 31 March 2015 of the property companies listed on the three stock markets all fared better as compared to the same period in 2014, with an increase of 62.2%, 36.7% and 39.8% in Shanghai, Shenzhen and Hong Kong respectively. In the past year, the property prices continued to rise. Despite the various cooling measures rolled out by the Chinese government, the overall performance of property companies maintained a steady growth momentum, with Shanghai accounting for the most significant increase, followed by Hong Kong.
Looking back at 2014, the saleable area and sales of property both declined substantially year-on-year due to downturns in the macroeconomic environment. Therefore, the Chinese government reduced administrative interventions in the property market in an attempt to allow self-adjustment by market supply and demand. The following are some of the major measures launched during the year:
- Housing shall be regulated differently in different cities in light of local conditions; the supply of small- and medium-sized commercial and joint-ownership housing units shall be increased; demand for housing for speculation and investment purposes shall be curbed; and sustained and healthy development of the property market shall be promoted;
- The PBOC requires banks to “give priority to loan demands of households buying their ordinary commodity housing for the first time”, “reasonably determine the first home loan interest rates”, and “approve and extend home loans to qualified individuals in a timely manner”;
- A number of cities abolished or significantly relaxed the purchase restriction policy; and
- The floor of loan interest rate shall be lowered to as low as 70% of the benchmark interest rate.
As the Chinese government relaxed the policy significantly and the property market heated up rapidly, developers accelerated the roll-out of property for sale to reduce inventory and the current ratios in the three regions declined successively. Meanwhile, the net profit margin of developers in the three regions all decreased as compared to the previous year, mainly because: property companies continued to adjust their product lines by shifting their focus to owner-occupied property in second- and third-tier cities from their original focus on luxury property; and the rise in land purchase cost and lending cost has led to continuous increase in operating cost.