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China's big land grab: Records topple as developers splash out

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Chinese property developers are swallowing up rivals and their land at a record pace as some of the nation's largest builders are accelerating the pace of what Citigroup Inc predicts will be a "mega-consolidation" in the industry.

[SHANGHAI] Chinese property developers are swallowing up rivals and their land at a record pace as some of the nation's largest builders are accelerating the pace of what Citigroup Inc predicts will be a "mega-consolidation" in the industry.

Developers spent a record 96.7 billion yuan (S$19.6 billion) in the second quarter on acquiring competitors or their assets, according to data compiled by Bloomberg. That included China Vanke Co's 55.1 billion yuan purchase of real estate assets of the bankrupt Guangdong International Trust Investment Corp in Guangzhou, the nation's biggest land deal.

Tight credit, competition for land, and local governments' measures to cool home markets in individual cities may be encouraging some smaller developers to exit the industry. Citigroup analysts say that a huge wave of consolidation is underway, with the biggest 10 developers set to boost their joint share of sales to as much as 28 per cent this year from 20 per cent in 2016.

Aggressive firms such as China Evergrande Group, Country Garden Holdings Co and Sunac China Holdings Ltd will help to drive that share to as much as 35 per cent before 2020, say Citigroup analysts Oscar Choi and Marco Sze.

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"Slimmer profits on home sales and ever-climbing land prices will keep squeezing smaller developers out of the industry," said Shanghai-based Guangfa Securities Co analyst Le Jiadong. "Even amid buoyant sales in lower-tier cities, some small builders are choosing to sell their entire assets - and leading players are seizing the chance for further landbank acquisitions." This year's total for developers' acquisitions of competitors or their assets is on track to surpass last year's 188 billion yuan.

Developers making large numbers of acquisitions include Sun Hongbin's Sunac, with the billionaire complaining last year that prices at government land auctions had risen to "absurd" levels.

His firm's 14 acquisitions since the start of last year, according to Bloomberg data, included a deal with technology company Legend Holdings Corp that spanned 42 property projects across 16 cities, including Beijing, Tianjin, Chongqing and Hangzhou.

BLOOMBERG

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