Chinese Real Estate Companies' Earnings Plummet... Market Hints at 'Bottoming Out' Theory

Top 100 Companies' Performance Down 41.6% Last Year
Real Estate Sales Income Shows Clear Improvement Since March

As the performance of Chinese real estate companies plummeted last year, the market is raising a 'bottoming-out theory.' Against the backdrop of the government's macroeconomic policy of economic normalization and expectations for market protection policies, there is a forecast that performance will no longer decline.

On the 10th, Chinese economic media Caixin cited data from the market information company China Real Estate Information Corporation (CRIC), reporting that the performance of the top 100 real estate companies in China last year fell sharply by 41.6% compared to the previous year. Among them, 90% of companies saw their performance worsen compared to the previous year, and 68 companies experienced a decline in performance exceeding 20%.

On the 8th, a real estate company was promoting sales in the basement of a shopping mall in downtown Beijing, China. (Photo by Kim Hyunjung)

Listed company Biguiyuan recorded a net loss of 2.96 billion yuan (approximately 567.1 billion KRW) last year, marking its first deficit in 16 years since listing. The state-owned enterprise Vanke Real Estate posted a net profit of 23.26 billion yuan last year, and China Overseas Land & Investment reported 4.264 billion yuan, both down 42.1% and 58.89% respectively from the previous year.

The biggest cause of the performance deterioration was the decline in profitability due to responding to falling market prices and reduced demand. Liquidity also worsened, with only 8 out of 69 listed real estate companies having an increase in cash and cash equivalents balance compared to the previous year as of the end of last year. The remaining 61 companies all saw a decrease in their book cash balances.

While housing and other real estate sales prices have stalled due to decreased demand, the continuous rise in land prices appears to have increased the burden on companies. According to the financial report of real estate developer Vanke, the average land price for the company's new projects rose about 11%, from 6,252 yuan per square meter in 2019 to 6,942 yuan in 2021.

Companies are viewing this year as a turning point that can gauge the future development prospects of real estate firms. State-owned enterprises such as China Overseas Land & Investment, Huarun Real Estate, China Overseas Development, and Vanke Real Estate recently announced their sales targets for this year, stating that growth reversing the existing trend will appear. At last month's performance meeting, Jiang Tiefeng, Executive Director of Overseas Land & Investment, emphasized, "Considering the macroeconomic growth rate target, real estate can no longer decline."

Real estate sales revenue has also shown an increasing trend for three consecutive months. The State Taxation Administration of China announced that real estate sales revenue last month increased by 17.9% compared to the same period a year ago. The increase rate significantly expanded from 2.3% in January-February this year. The new housing price index in China's 70 major cities turned upward in February for the first time in 18 months.

This content was produced with the assistance of AI translation services.