Amidst the lacklustre residential market in Singapore, the earnings of local developers have been boosted by strong sales in China’s largest cities, reported Nikkei Asian Review.
For instance, CapitaLand’s revenue surged by 21.3 percent year-on-year to US$3.41 billion (S$4.73 billion), driven by robust residential transactions in China. Despite the country’s softer economy, sales increased two-fold to US$2.36 billion (S$3.27 billion).
City Developments Limited (CDL), another major developer, has also reaped rewards for venturing into key Chinese cities.
For the 2015 financial year, CDL China sold 13 villas in Shanghai and nearly 700 units in Suzhou, with total sales amounting to 1.6 billion yuan (S$340.74 million). The company’s net profit inched up 0.5 percent last year to S$773.3 million.
“There have been signs of improvement, with increased buying activity in certain cities such as Shanghai and Suzhou after the government lifted several cooling measures and relaxed loan restrictions in 2015,” CDL said in a statement.
While the Chinese economy is not as vibrant as before, home builders have profited by focusing on first-tier cities, like Beijing and Shanghai, which are seeing higher growth than the rest of the country.
According to Joe Zhou, JLL’s Research Head for China, “residential sales volumes across 20 major cities in China shot up by 28 percent in 2015. Prices in Tier 1.5 and 2 cities are also gaining momentum”, but third- and fourth-tier cities are still saddled with excess supply.
The Chinese prefer to invest in first-tier cities as the quality of the properties there are generally superior to those found in other urban areas. Also, there’s limited investment opportunities in the country, explained David Ji, Knight Frank’s Head of Research and Consultancy for Greater China.
Chinese cities are categorised into tiers based on their population, gross domestic product and other factors.
Picture Source: Artist’s impression of Lotus Mansion, a residential development by CapitaLand in Shanghai.
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