Second-Tier Chinese Cities Play Bigger Role in Influencing Real Estate Companies’ Performance

BEIJING -

According to the “Sales Rankings of Chinese Real Estate Companies for Q3 2009″ report released on October 9th by CRIC (China) Information Technology Co., Ltd., in cooperation with China Real Estate Appraisal and Shanghai E-house R&D Institute, the recovery of the real estate market in China during the first three quarters of 2009 enabled real estate developers in China to hit new highs. According to data from the top 20 real estate companies, sales generated in second-tier cities significantly increased, becoming the key factor influencing the performance of the companies. Sina Leju was the first media source to announce the release of this report.

Second-tier cities becoming main marketplace

The report shows that second-tier cities are becoming increasingly important marketplaces for real estate companies represented by Evergrande Real Estate Group. Floor space sold in second-tier cities for the first three quarters of the year comprised 54 percent of the top 20 real estate companies’ total, far more than other cities, while sales revenue comprised 41 percent, up one percent from the first half. Sales revenue in first-tier cities comprised 37 percent of their total, down three percent from the first half.

Real estate developers like Evergrande Real Estate, long committed to expansion in second-tier Chinese cities, have entered more than 20 provincial capital cities, according to Shengping Long, director of China Real Estate Appraisal. As China’s real estate market has rebounded, Evergrande Real Estate has expanded in second-tier cities, leading the market in sales volume, land reserves and surface area of projects under construction. In this year’s third quarter, Evergrande Real Estate posted sales volume of 2.303 million square meters and sales revenue of RMB 12.33 billion, the most in Mainland China. By the third quarter’s end, the developer’s surface area of projects under development exceeded 17 million square meters and land reserves were 51 million square meters, topping both lists.

Ever-growing, less risky second- and third-tier cities are playing an increasingly important role in the sales growth of China’s real estate developers. Developers expect future benefits from their competitive advantages and significant land reserves in second-tier cities.

Economic recovery leads to reshuffle of real estate market

Industry analysts predict record sales revenue this year for well-established developers, who have a competitive advantage in overall sales revenue. However, growing developers such as Evergrande Real Estate are approaching and in some areas outperforming those developers.

Companies like Evergrande Real Estate Group have advanced in “Sales Rankings of Chinese Real Estate Companies for Q3 2009,” evidence of changes in competition in the real estate sector. The report shows that a large number of low-cost land reserves, efficient operating models and aggressive listing plans drive the rapid development of these companies, including Evergrande Real Estate Group.

Zhang Yongyue, president of Shanghai E-house R&D Institute, said the reshuffling of the Chinese real estate sector was inevitable given the recovery of the global economy, further demonstrating that clear strategies and competitive advantages are important to real estate developers. Rankings in terms of sales revenue for the three levels of developers: RMB 50 billion or greater (dominated by old real estate companies); RMB 30-50 billion (five companies including Evergrande Real Estate Group); RMB 10-30 billion (the remaining companies). Rankings in terms of floor space sold: over 5 million square meters (mainly consisting of old real estate companies and developers represented by Evergrande Real Estate Group).

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Source: Sina Leju

Kevin, +86-10-5895-1005 (Fax), or Kevinmts at sina.com