HONG KONG (Reuters) - Chinese developers China Overseas Land & Investment Ltd (0688.HK) and Country Garden Holdings Company Ltd (2007.HK) on Wednesday said sales by area may see challenges in 2017 on government tightening, after reporting solid 2016 profit growth.
The companies were the first major developers to report their 2016 results after Beijing stepped up moves to cool the real estate market on concerns of a bubble, which could weigh on the developers’ margins this year.
“The group is cautiously optimistic about China’s property market in 2017. It is expected that policy regulation by the central Chinese government will continue,” China Overseas’ new Chairman Xiao Xiao said.
“China’s property sales are expected to experience some resistance in the first half of 2017 as market consolidation accelerates, with the sector overall presenting both challenges and opportunities.”
China Overseas Land, the country’s sixth-largest homebuilder, said on Wednesday its core profit last year rose 13.8 percent to HK$31.37 billion ($4.04 billion), while profit for Country Garden, the country’s third-largest builder, (2007.HK), jumped 22.3 percent.
Despite its cautious optimism, state-owned China Overseas set a modest sales target for 2017 of at least HK$210 billion, the same level it achieved last year. Xiao said the conservative guidance is due to the tightening policies.
Country Garden Chief executive officer Mo Bin told an earnings conference that he expects company sales by area will be flat in 2017, but the average selling price will rise significantly.
The company targets sales at 400 billion yuan ($58.08 billion) this year, almost 30 percent higher than 2016, thanks to stronger growth in smaller cities and a bigger slate of projects due for completion.
Country Garden, earmarked up to 15 percent for overseas investment, said earlier this month it had shut some mainland sales centers promoting its $100 billion Forest City project in Malaysia, in response to Beijing’s moves to stop capital flight into offshore investments.
“We are not selling the project inside China anymore,” Country Garden chairman Yeung said. “We don’t do anything that will be ‘spanked’ (punished) by the government.” But he declined to comment on some Forest City Chinese buyers requesting to refund as they were not able transfer money out of the country to pay installments.
Country Garden’s Chief Financial Officer Wu Bijun said they do not accept yuan as payment for the Malaysia project anymore.
Reporting by Clare Jim; Editing by Stephen Coates and Christian Schmollinger