Evergrande: third-tier city strategy bodes well for 2011
Updated: 2011-03-15 07:06
By Joy Li(HK Edition)
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Guangzhou-based property developer said Monday it is very optimistic about achieving its full-year sales target after sales in the first two months grew significantly compared with a year ago.
"Despite macro tightening measures such as property-purchasing limitations placed by the government, our strategy of focusing on third-tier cities will shield us from adverse impacts," said James Xia, deputy chairman and chief executive officer at Evergrande. "We are confident of achieving our sales target and going beyond that in 2011."
According to figures released by the company, contracted sales in February reached 4.5 billion yuan, up 261.65 percent from a year ago. Contracted sold ground floor area amounted to 684,000 square meters, three times that of last year.
Meanwhile, the average selling price in February fell to 6,577 yuan per square meter from 7,273 yuan during the same period in 2010. The drop was due to its more expensive Guangdong projects carrying a smaller weight in total sales in February, down to 10.4 percent from 30 percent, the company said in a statement.
Combined sales in the first two months of 2011 totaled 14.29 billion yuan, up 202.7 percent from a year ago. As a month-on-month comparison, February sales were 46 percent of January's results, which totaled 9.79 billion yuan.
Xia said past figures show that February is traditionally a slow season, due to the long holiday period during the Spring Festival. He believes that February's figure will mark the yearly low, with sales volume and revenue increasing from March onwards.
Evergrande currently sells 112 residential projects in 62 mainland cities - two first-tier cities (Guangzhou and Shanghai), 21 second-tier cities, and 39 third-tier cities.
Xia said around 40 percent of its project portfolio is located in third-tier cities and he hopes to increase this ratio to 50 to 60 percent in the next one or two years.
Many cities, mainly provincial capitals, have placed restrictions on property purchases in a bid to cool down the sizzling sector. Meanwhile, the central government has also vowed to build more subsidized housing to address calls from the needy.
Xia said Evergrande's strategy of turning to third-tier cities, developed in 2009 and followed through in 2010, will bode well for the company, as these cities are less exposed to the central government's tightening measures and have more demand from first-time buyers.
In a March research report by CCB International, the equity research arm of China Construction Bank, analyst Edmond Chan wrote that though observers began to anticipate further rounds of tightening and a possible shift of these measures to third-tier cities where prices are low, such risks are exaggerated.
Xia said 21 cities in which Evergrande has projects are now subject to limitation orders, with the remaining 41 cities unaffected. He thinks that the measures are temporary and will be lifted when subsidized housing brings about an effect.
China Daily
(HK Edition 03/15/2011 page3)