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Development of Real Estate Industry in Recent Years and Relevant Policy Options
2009-12-07
By Zhang Zhengjun, Enterprise Research Institute, the DRC
Research Report No 111, 2009
I. Development of Real Estate Industry in Recent Years
1. Rapid development of real estate industry in recent years
The demand boom has attracted large numbers of enterprises into the real estate industry, thus expanding the industry at a fast pace. Since 2000, the real estate sales ratio went up continuously from 66% in 2001 to 115% in 2007. The demand boom has attracted numerous enterprises into the real estate industry, increasing the number of the real estate development enterprises from 27,000 in 2000 to 62,000 in 2007, the number was more than doubled. The real estate industry has been growing rapidly and the annual average compound growth rate for the area of the commercial housing sold has reached 22%. Since 2003, the average land price has witnessed an annual increase of more than 15% in the main (Table 1).
Table 1 Rapid Development of Real Estate Industry
|
Year |
Number of enterprises |
Total areas of sold commercial houses（10000m2） |
Average price of commercial houses （yuan/m2） |
Average land price（yuan/m2） |
Ratio of residential houses in total commercial houses（%） |
Saleratio （%） |
|
2000 |
27303 |
18637.1 |
2112 |
434.1 |
88.9 |
66.0 |
|
2001 |
29552 |
22411.9 |
2170 |
443.8 |
89.0 |
66.8 |
|
2002 |
32618 |
26808.3 |
2250 |
461.1 |
88.4 |
67.8 |
|
2003 |
37123 |
33717.6 |
2359 |
575.7 |
88.3 |
71.8 |
|
2004 |
59242 |
38231.6 |
2778 |
647.1 |
88.5 |
79.6 |
|
2005 |
56290 |
55486.2 |
3168 |
759.2 |
89.4 |
92.8 |
|
2006 |
58710 |
61857.1 |
3367 |
907.2 |
89.6 |
99.3 |
|
2007 |
62518 |
77354.7 |
3864 |
1210.9 |
90.7 |
115.7 |
Data: China Statistical Yearbook
The growth rate of the average business profit earned by each real estate enterprise has remained far higher than that of the average income earned by each enterprise and that of the asset volume. Since 2000, although the area of the real estate sold reached an annual average compound growth rate of 22%, as a result of the drastic increase of the real estate enterprises, the growth rate of the average income earned by each enterprise and that of the asset volume remained low. The annual average compound growth rate of the average income earned by each enterprise was 10.8% and that of the asset volume was 8.5%, whereas the annual average growth rate of the average business profit earned by each enterprise reached 48.2%. The average income earned by each enterprise and the asset volume of each enterprise all approximately doubled from 2000 to 2007, while the average business profit earned by each enterprise increased by more than 13 times (Table 2).
Table 2 Data Related to Real Estate Enterprises
|
Year |
Average income of each enterprise |
Average assets of each enterprise |
Average business profit of each enterprise |
|||
|
Absolute number （10000yuan） |
Growth rate （%） |
Absolute number （10000yuan） |
Growth rate （%） |
Absolute number （10000yuan） |
Growth rate （%） |
|
|
2000 |
1653.9 |
|
9224.6 |
|
26.8 |
|
|
2001 |
1851.5 |
12.0 |
9666.6 |
4.8 |
42.5 |
58.2 |
|
2002 |
2169.9 |
17.2 |
10130.3 |
4.8 |
77.5 |
82.6 |
|
2003 |
2461.4 |
13.4 |
10906.0 |
7.7 |
115.9 |
49.5 |
|
2004 |
2247.5 |
-8.7 |
10430.0 |
-4.4 |
144.8 |
24.9 |
|
2005 |
2623.8 |
16.7 |
12825.3 |
23.0 |
197.1 |
36.1 |
|
2006 |
3073.9 |
17.2 |
15056.7 |
17.4 |
284.4 |
44.3 |
|
2007 |
3742.5 |
21.8 |
17767.4 |
18.0 |
389.8 |
37.1 |
Data: China Statistical Yearbook
The volume of the average income earned by the top 100 real estate enterprises and their asset volume and net profit all increased by a wide margin. From 2003 to 2007, the annual average compound growth rate of the average income earned by the top 100 enterprises reached 48.2% and that of the asset volume reached 43.7%. The net profit earned by each enterprise increased much faster, with the annual average compound growth rate reaching 68%. The average income earned by each enterprise and the average asset volume increased by 3～4 times from 2003 to 2007 and the average net profit mounted up by almost 7 times(Table 3).
Table 3 Average Data Related to Top 100 Enterprises of Real Estate Industry
|
Year |
Average income of each enterprise |
Average assets of each enterprise |
Average net profit of each enterprise |
|||
|
Absolute number （100 million yuan） |
Growth rate （%） |
Absolute number （100 million yuan） |
Growth rate （%） |
Absolute number （100 million yuan） |
Growth rate （%） |
|
|
2003 |
10.4 |
|
27.4 |
|
0.9 |
|
|
2004 |
16.3 |
57.4 |
37.6 |
37.5 |
1.5 |
67.4 |
|
2005 |
20.7 |
27.0 |
57.1 |
51.8 |
2.3 |
57.1 |
|
2006 |
30.3 |
46.2 |
79.3 |
38.9 |
3.5 |
50.4 |
|
2007 |
50.1 |
65.3 |
117.0 |
47.4 |
7.1 |
101.4 |
Data: China Index Research Institute
In 2008, affected by the operation law of the real estate, the worsening international economic situation and the Chinese domestic macro-economic adjustment, sales by the real estate enterprises declined at large, but the sales by the top 100 enterprises were still superior to the average level of the sector. In 2008, the sales of the commercial housing across the country amounted to 2407.1 billion yuan, down by 19.5%, year on year, while sales by the top 100 enterprises reached 524.4 billion yuan, only down by 3.9% from a year ago. Sales by 33 enterprises continued to grow, with the average growth rate reaching 32.7%. The market share of the top 100 enterprises increased to 21.8% and their aggregate asset volume went up by 22.4%.
2. A number of fast growing, powerful, large-scaled and responsibility- assuming enterprises have turned up
The leading real estate enterprises are large in scale, growing fast, profit-making and have sound financial systems，thus always remaining strong. In 2007, the average asset volume, business income and net profit of the top 4 enterprises (including Vanke, Zhonghai Real Estate, Hopson and Poly Real Estate Group) of the top 100 real estate enterprises reached 63.3 billion yuan, 17.8 billion yuan and 3.5 billion yuan respectively; the annual average growth rate of their average aggregate assets, business income and net profit since 2003 reached 70%, 50% and 81% respectively. The growth of the Poly Real Estate Group remained particularly fast, with the annual average growth rate of its aggregate assets, business income and net profit reaching 116%, 90% and 114% respectively, and the annual average growth rate of the aggregate assets, business income and net profit of the flagship enterprise Vanke also reached 75%, 53% and 73%, respectively, all being much higher than the average of the real estate industry and the average of the top 100 enterprises; the average aggregate return rate on assets was equivalent to that of the top 100 enterprises, but the net profit rate was higher; the asset-liability ratio was between 63%～65%, being apparently lower than the average of the top 100 enterprises; since the release of the research findings on top 100 enterprises in 2004, enterprises like Vanke, Zhonghai Real Estate and Hopson ranked among the top 5 in the main(Table 4).
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