HONG KONG -- In a sign of the upheaval created by China's shrinking real estate market, the industry has crowned a new sales king: state-owned Poly Development and Holdings Group.
The Shanghai-listed developer logged contracted sales of 38 billion yuan ($5.66 billion) in May to unseat China Vanke, which sold 30.76 billion yuan then.
Poly emerged on top by virtue of a smaller sales decline than bigger rivals. Its year-on-year drop came to 36%, compared with 47% for Vanke and 50% for Country Garden, which was the top seller in January and February.
This new ranking shows how state-owned enterprises are climbing over private developers, thanks to better access to funding from government-controlled banks and other official support. In May, five of the top six developers which released monthly sales were state-owned.
All 32 listed Chinese developers which had at least 100 billion yuan in contracted sales in 2020 and still publish monthly data posted drops of at least 10% in May sales. Three-quarters of them recorded declines of more than 50%.
China Evergrande Group, which ranked second a year ago, has stopped disclosing monthly sales. Sunac China Holdings slipped to eighth from the very top a year ago after defaulting on $750 million offshore bond last month.
Chinese developers saw their fortunes sink during the second half of 2021, when Beijing stepped in to curb speculative homebuying and clamp down on highly indebted private players. President Xi Jinping's strict zero-COVID policy, leading to recent lockdowns in major cities including Shanghai, has only made things worse for the industry.
"We continue to expect SOE developers and selective POE [privately owned enterprises] developers to outperform most POE names on property sales performance," Wang Yi, an analyst with Goldman Sachs affiliate Beijing Gao Hua Securities, wrote in a client note on Wednesday.
Wang cited limited disruption to the construction pipeline and salable resources for such companies, as well as lower reinvestment costs. His top pick in the sector is China Overseas Land and Investment (COLI), which ranked fourth in May by limiting its sales drop to 23%.
Citigroup real estate analyst Griffin Chan's current property picks include COLI and China Resources Land, which had the lowest drop in monthly contracted sales for May, based on their "safe" balance sheets and dividend yield.
These state-backed players can afford to buy new land, even amid the sector's liquidity crunch. National Bureau of Statistics data released Wednesday showed a total of 6.04 trillion yuan was made available for developers between January and May, down 25.8% on the year.
Poly disclosed on Monday that it recently spent a combined 2.81 billion yuan to acquire four plots for residential and commercial projects in four southern cities.
COLI secured one site each in Beijing, Guangzhou and Nanchang last month, paying 6.64 billion yuan. Vanke obtained six development sites in five cities in May at an aggregate cost of 11.87 billion yuan.
Though these purchases are smaller than the year before, many developers were unable to make any acquisitions.
Shenzhen-listed Jiangsu Zhongnan Construction Group reported no additions to its land bank last month, after purchasing 13 sites in 11 cities for 7.98 billion yuan last May. The midsized developer's monthly contracted sales between March and May were only a fourth of year-earlier levels.
Smaller developers face other troubles. Sichuan Languang Development's unpaid debt principal and interest totaled 33.81 billion yuan at the end of May. The company, acknowledged it is facing "liquidity tightness and liabilities risks," said earlier this month that another lawsuit has been filed by creditors claiming 1.96 billion yuan.
Most observers remain pessimistic about the property market.
"We foresee the market to remain weak in the short term, exacerbated by disturbances caused by the pandemic," said Kelly Chen, real estate analyst at Moody's Investors Service. The credit rating agency expects contracted sales to fall 10% to 15% for the full year, "as we need to be more conservative on the outlook."
Official national statistics released on Thursday indicated that the price of new homes dropped year-on-year in 46 of 70 major cities tracked in May, while 57 saw falls in existing home prices.
"The property sector will continue to be difficult, despite recent support policies," said Dong Cheng, head of Asia macroeconomic research at Pictet Wealth Management. Beijing has enacted support measures in the past few months, including trimming its key five-year lending rate by 15 basis points.
"From a long-term structural perspective, we think the high-growth period of time for housing is already over, and demand won't be as strong as before," he said. "At the same time, for developers, many of them are still facing a lot of stress in terms of financing."
Additional reporting by Peggy Ye.