Leading real estate developer sees income, profit growth in first half

China Vanke, a leading real estate developer, remains confident in the market recovery trend despite recent mortgage payment concerns as the company reported year-on-year growth in both income and profit in the first half.

Its interim results show that in the first six months, operating income reached 206.92 billion yuan ($30 billion), a year-on-year increase of 23.8 percent, and profit surged more than 10 percent to 12.22 billion yuan. It is a hard-won increase as its net profit declined by almost half last year.

On the heels of the interim report, the stock of Vanke increased 4.66 percent to close at 16.63 yuan on the A-share market on Wednesday.

Vanke Chairman Yu Liang said during an online meeting on Wednesday that the main issue of China's real estate industry now focuses on rebuilding market confidence, as the prices of land and homes have become stable.

He believes the rigid demand is still very strong. "About 1 to 1.1 billion square meters in the current stock housing market need to be renewed every year, but the number of new homes still cannot keep up with the speed of natural renewals," he said.

When the market has shrunk too much, it will accumulate the momentum for spontaneous recovery, Yu added.

He stated at a recent meeting with company shareholders that China's housing market has hit bottom and recovery will be relatively slow.

According to data from the National Bureau of Statistics, the sales area of commercial housing nationwide in the first six months this year decreased 22.2 percent year-on-year, but the trading volume of major cities' housing markets surged about 50 percent month-on-month in June.

The sales volume fell sharply again in July as market confidence was bruised by a wave of homebuyers refusing to make mortgage payments due to the delayed delivery or stalled construction of their presold homes.

Yu reiterated rebuilding market confidence needs time. He guaranteed the delivery of Vanke's projects on time and remained confident that Vanke will meet the target of "rebound to stable, then enhancement" this year.

Adrian Cheng Chi-kong, chief executive of New World Development, also said in a media interview on Sunday that the mainland's property market has hit bottom and is going to slowly recover.

He is optimistic that it will recover well in the next one or two years. The company announced it will invest 10 billion yuan in land in top-tier Chinese cities over the next year.

A recent report by UBS Global Wealth Management's chief investment office suggested there have been some signs of stabilization in the property market following the government's pledges to ensure deliveries of stalled projects. It estimated the property market sentiment to normalize in the coming months.

But Yue Xiangyu, an analyst of the Institute for the Development of Chinese Economic Thought at Shanghai University of Finance and Economics, pointed out most property companies still face heavy pressure.

"According to the interim results published recently, more than half of them reported a decrease in revenue and only a third recorded net profit growth year-on-year.

Yang Kan, chief analyst at Ping An Securities, agreed, saying the pressure on China's real estate market still exists in the short term, but he said the government's supporting policies will improve the industry's performance.

As for long-term prospects, he expects profit margins to stabilize as some developers are pushed out of the market and industry structure is further optimized.