Contracted sales at major Chinese property developers resumed growth in the second quarter as the nation's economy improved amid easing pandemic restrictions, setting the stage for a continued recovery in the second half.
In the three months ended June 30, combined contracted property sales at the nation's 10 largest developers by asset totaled 1.127 trillion yuan, up 27.2% from 885.62 billion yuan a year earlier, according to company statements. Sales also recovered from a 0.1% year-over-year decline in the first quarter.
The top developers are China Evergrande Group, Country Garden Holdings Co. Ltd., China Vanke Co. Ltd., Sunac China Holdings Ltd., Longfor Group Holdings Ltd., Seazen Group Ltd., Guangzhou R&F Properties Co. Ltd., Greentown China Holdings Ltd., Cifi Holdings (Group) Co. Ltd. and Agile Group Holdings Ltd.
Contracted sales in terms of gross floor area also grew more quickly. In the second quarter, the gross floor area sold by those 10 developers rose 26.3% to 88.7 million square meters from 70.3 million square meters a year earlier, compared with no growth in the first quarter on a year-over-year basis.
For the first six months of 2020, combined contracted sales of the top developers grew 12.9% to 1.719 trillion yuan from 1.523 trillion yuan a year ago. Gross floor area sold also rose 16.4% to 139.7 million square meters from 120.0 million square meters.
"As the economy recovers after the pandemic has died down, the market will become more and more favorable to developers," Victor Cheung, executive director and CEO of Midland Holdings Ltd.'s China division, told S&P Global Market Intelligence. He expects China's domestic property market to exhibit an upward trend or be at least flat in the second half of the year.
China started gradually reopening its economy in March, after reporting the world's first cases of COVID-19 in late 2019. Thanks to the resumption of work and manufacturing, the world's second-largest economy posted 3.2% year-over-year expansion in the second quarter, compared with a 6.8% contraction in the first quarter when most of the country was in lockdown.
The National Bureau of Statistics of China noted there was a 2.6% year-over-year improvement in the investments for China's residential properties and a 1.9% hike for investments in the wider real estate sector. This is in contrast with the 33% slump in global property investments for the same period, according to a report by real estate services provider Savills PLC.
Outlook still challenging
Cheung noted that although the recent sales performance was encouraging, "there could be unexpected changes as state intervention may occur if the property market is overheated."
He also said some of the growth in the second quarter was pent-up demand, which may slow in the months ahead.
"The property markets of eastern and western China have performed better in [the first half of] 2020, but with a considerable proportion of customers with inelastic demands having successfully acquired their own homes, the momentum is likely to slow down in the next six months," he said.
Meanwhile, in central and northeastern China, he said the property market has contracted significantly in the first half and may see recovery in the rest of the year.
"The economic growth rate has already switched from the negative side to the positive one, which is the key to stable property market development in [the second half of] 2020," he said.
As of July 21, US$1 was equivalent to 6.98 Chinese yuan.