Chinese developers conservative on 2016 sales after price surge

[SHANGHAI] Chinese developers set conservative goals for sales in 2016, indicating that they expect property growth to slow after a period of credit-fueled expansion.

Twenty-two major Chinese developers set a combined contracted sales goal at 1.3 trillion yuan (S$273 billion) this year, representing an 8.8 per cent gain from the sales value they reached in 2015, according to data compiled by Bloomberg. The projected sales growth is smaller than the 20 per cent increase they delivered a year earlier.

Diverging sales targets set by builders came against the backdrop of the nation's fragmented property market. Evergrande Real Estate Group Ltd, which has about half of its inventory in third-and fourth-tier regions, targeted 200 billion yuan of sales in 2016, lower than its 201.3 billion yuan figure in 2015, dragging the average target lower.

China Jinmao Holdings Group and Country Garden Holdings Co were among the most aggressive developers, targeting 29 per cent and 20 per cent respectively for sales.

Builders are still "relatively conservative," despite surging sales in first-tier cities in the first quarter, Su Yuhui at Yuanta Securities said, adding that targets set are likely to be surpassed.

"The earlier market conditions where volume and prices easily climbed substantially is hard to be seen nowadays."

China's property market staged a comeback after government efforts to bolster the market and six interest rate cuts since Nov 2014.

The value of homes sold jumped 71 per cent in March to 869.8 billion yuan in the biggest year-on-year increase since at least 2015, according to Bloomberg calculations based on statistics bureau data released on Friday.

Still, the rebound may be short-lived after some top cities imposed measures to cool the property market after a frenzied pace of buying.

Eight developers doubled sales in the first quarter, including Shui On Land Ltd, with a 565 per cent increase, and CIFI Holdings Group Co, with a 199 per cent jump.

The country's growth in home sales may "substantially" slow in the second and third quarters, according to Du Jinsong, a Hong Kong-based analyst at Credit Suisse Group AG.

BLOOMBERG