China improved the earnings of local developers

Amidst the lacklustre residential marketplace in Singapore, strong sales in the biggest cities in China has improved the earnings of local developers, reported Nikkei Asian Review.

For example, CapitaLand’s sales soared by 21.3 percent year-on-year to US$3.41 billion (S$4.73 billion), driven by solid residential transactions in China. In spite of the nation’s softer economy, sales rose two-fold to US$2.36 billion (S$3.27 billion).

City Developments Limited (CDL), another leading developer, has also reaped rewards for venturing into essential Chinese cities.

For the 2015 financial year, CDL China sold 13 villas in Shanghai and almost 700 units in Suzhou, with total sales amounting to 1.6 billion yuan (S$340.74 million). The firm’s net profit inched up 0.5 percent last year to S$773.3 million.

“There have been hints of development, with increased buying activity in certain cities for example Shanghai and Suzhou after the government lifted several cooling measures and comfortable loan restrictions in 2015,” CDL said in a statement.

While the Chinese economy isn’t as lively home builders have gained by focusing on first-tier cities, like Shanghai and Beijing, which are finding higher growth compared to the rest of the state.

Based on 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-grade cities are still saddled with surplus supply.

The Chinese prefer to invest in first-tier cities as the quality of the properties there are usually superior to those found in other urban areas. Additionally, there is small investment opportunities in the country, clarified David Ji, Knight Frank’s Head of Consultancy and Research for Greater China.

Chinese cities are categorised into grades based on their population, gross domestic product and other variables.

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