Country Garden Takes Fading Property Crown as Market Cools

Country Garden Holdings Co. Ltd. was China’s leading property developer last year, even as growth declined sharply for the entire sector under restrictive government policies aimed at curbing speculative real estate buying.

Country Garden posted 12.4 billion yuan ($1.8 billion) in sales for December, bringing its total for the year to 552.2 billion yuan, according to a company announcement published late Monday on the Hong Kong stock exchange. Last week, China Vanke Co. Ltd. reported annual sales of 630.8 billion yuan, while China Evergrande Group posted 601.1 billion yuan.

But due to the different way the three companies report, Country Garden was likely the biggest in terms of actual sales. That’s because Vanke and Evergrande typically include co-developed projects in their figures, whereas Country Garden’s only include projects where it holds an equity interest. Reflecting that discrepancy, third-party data compiler CRIC’s own data showed that Country Garden was China’s top developer last year with 771.5 billion yuan in sales.

China is one of the world’s largest but also least mature property markets, with less than 30 years of history. It has also become one of the world’s most expensive markets compared with average incomes, especially in major cities like Beijing and Shanghai, due to rampant speculation.

In a bid to cool rapid price increases that dogged the market for much of the 2010s, Beijing has instructed local governments to take restrictive measures to limit speculation. Those include limiting the number of purchases an individual can make, requiring large down payments and even banning non-residents from buying property in some markets.

The measures have sharply slowed price growth and transaction volumes over the last two years, putting a major damper on revenue growth for developers like Country Garden, Vanke and Evergrande.

Each of the three saw slowing growth rates in 2019, continuing a trend from the previous year when the slowdown was even more dramatic as cooling measures first kicked in. Country Garden’s growth last year tumbled by 21 percentage points to 10%, while Vanke’s slid by 10.5 percentage points to 4% growth. Evergrande’s 9% growth was down by a single percentage point from 2018 levels.

The previous year revenue growth for the trio had plunged by anywhere from 24 to 46 percentage points.

As China’s economy slows, some cities have found themselves with excess unsold property — especially smaller cities. That has led Beijing to take a more nuanced, location-specific approach in recent months whereby cities can take stimulating measures if the market is weak, in addition to the more restrictive measures in more overheated markets.

The new approach was on display in two developments this week, one stimulating and the other restrictive. The former saw the buyers offered government subsidies for purchases in the small Sichuan county of Fushun. The latter saw the larger city of Tangshan in northern Hebei province roll out restrictive measures limiting the resale of homes.

Contact reporter Yang Ge (geyang@caixin.com; twitter: @youngchinabiz)