HONG KONG -- State-owned developers have turned more cautious about upcoming home sales than their peers in the private sector, after stricter purchasing and loan curbs were rolled out in Beijing and provincial cities in recent days. But the overriding theme remains that most developers are still aggressively expanding their land banks.
So far in March, tightening measures have spread to about 18 cities, but major developers are yet to make substantial spending cuts. China's sixth largest developer by sales, state-owned China Overseas Land & Investment has set a sales target of 210 billion Hong Kong dollars ($27.0 billion) for 2017, only a slight decrease from last year's actual sales of HK$210.6 billion. Smaller state-owned player Poly Property has a 35 billion yuan ($5.1 billion) target, on par with actual sales last year.
"Our target is a bit more conservative as tightening measures are in place," said China Overseas Chairman Xiao Xiao on Wednesday. He added that the target could change based on market conditions. "We'd never compare our sales scale [with rivals]. Our ultimate goal is to strive for earnings growth. "
China Overseas reported that net profit increased 6.9% to HK$37.02 billion in 2016 year-on-year, missing market estimates, after taking into account losses from its acquisition of residential assets from state-run conglomerate Citic. Revenue dropped 3.2% to HK$164 billion in spite of a soaring property market last year.
Despite a slightly less ambitious sales target, the developer plans to more than double capital expenditure to grow its land bank this year. It will splash HK$100 billion on about 16 million square meters of new land, up from less than 10 million square meters last year.
"Key state-owned enterprises tend to have more opportunities in mergers and acquisitions. I don't see major obstacles for us ahead," Xiao said.
With rising competition for land and cooling measures expanding to more cities, observers expect market consolidation to accelerate.
According to Citi, the top 10 developers could see their market share reach 25% this year, from 20% last year, prompting their peers to catch up on land replenishment.
"While many will criticize this leveraged high growth, the key is many other developers ... without land-banking will be confronted by the challenge of being squeezed out," wrote Oscar Choi, Citi's head of China research and head of Asia-Pacific property, in a note this month.
Medium-sized private developer Yuzhou Properties has allocated a budget of 15 billion-20 billion yuan to acquire new land this year. "Depending on our sales, we will speed up land replenishment," said Yuzhou Founder and Chairman Lam Lung-on at a briefing on Wednesday.
The Shanghai-based developer has moved its headquarters from the southern Fujian province to focus on the fast-growing cities such as Hangzhou and Suzhou in the eastern Yangtze River Delta.
Yuzhou saw its net profit surge 25.2% on the year to 2.1 billion yuan last year on the back of strong sales. It raised its sales target to 30 billion yuan from 28 billion yuan previously, after February sales soared 118% from a year ago.
"We are confident a third of our annual target will be achieved in the first quarter," said Lam, who shrugged off the impact of the new cooling measures. "Those measures are aimed at curbing speculation activities but we build homes for end-users, whose demand are still very strong."
Country Garden, China's No. 3 homebuilder by sales, also declared on Wednesday a sales target of 400 billion yuan for 2017, up 82% from last year's, which had been revised upward by 31% in August.
The bullish move came after the privately held developer more than doubled its contracted sales last year to 308.8 billion yuan. About 59% of those came from first- and second-tier cities, where the Guangdong-based developer has made aggressive inroads since 2015.
With six projects abroad, Country Garden is apparently feeling the heat from Beijing's desperation to staunch capital flight.
Two weeks ago, it shut its nationwide sales centers promoting its 20 sq. km development, known as Forest City, on the artificial islands in Malaysia's Johor. The project, jointly developed with Johor state government, reportedly received most interest from mainland citizens.
But Country Garden Chairman Yeung Kwok-keung brushed off concerns that tighter capital control has hurt the project. "It's meant for buyers worldwide," he said, adding that the construction of Forest City was "on a roll-over basis" in accordance with sales progress and market reception.
Yeung declined to comment on purchases that were reportedly thwarted by the January ban on converting the yuan into other currencies for overseas property purchases. "Those are singular cases," he said. "But we will ensure our company complies with the law."
The developer stressed that the profit margin of Forest City was, so far, higher than those for projects on the mainland developed by the group in the same period. "The project has achieved positive net cash flow," said Chief Executive Mo Bin.
Nikkei staff writer Joyce Ho in Hong Kong contributed to this story.