State-owned firms to extend domination of China property market, support its recovery, analysts say
- Divergence in sector performance sees SOEs and quality developers post resilient growth while smaller developers lose competitiveness
- Property-related activity to decline to an eighth of China’s GDP, compared with around one-fifth of the economy before the pandemic, analysts say
State-owned developers will remain the main drivers of China’s property market, and are seen holding more than half the pie in the coming years, although the sector turnaround will also depend on the more efficient private sector, analysts said.
“State-owned enterprises [SOEs] are taking up a more important role in the property market,” said Raymond Cheng, managing director of CGS-CIMB Securities. “Last year, SOEs accounted for around 40 per cent of market share in terms of sales based on our estimate. We expect SOEs to control at least half the market in the next two to three years.”
Sales performance is diverging across the sector. In the year to date, SOEs and quality developers like CR Land, Coli, Longfor Property and Yuexiu posted sales growth of between 70 per cent and 215 per cent year on year.
In stark contrast, sales for troubled developers like Times China, Sunac China and Zhongliang Holdings plunged some 50 to 60 per cent year on year, owing to homebuyers’ reluctance to buy from them.
“The gap will continue to widen,” Cheng said, explaining that SOEs have more resources, including financial support from banks that keep their funding costs low.