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Real Estate: Strong growth resumes, but with regulations

Brands match scale with profitability

 

Chinese government initiatives to increase affordable housing and stimulate the economy drove a strong real estate category recovery. But government attempts to curtail speculation slowed housing sales in certain cities and depressed the stock prices of some real estate brands. Consequently, the real estate category increased 28 percent in value, but the value changes of the nine real estate brands in the BrandZ™ China Top 100 varied widely, from an 88 percent rise to a 12 percent decline.

 

Real estate brands adjusted in different ways to this new reality where urbanization continues to create substantial need for housing in major cities, but government moderates supply to stabilize the market. Generally, real estate brands planned to pursue profitable growth but assume less debt. They also expected to diversify from real estate into related services, such as senior care and tourism facilities.

 

Evergrande Real Estate, the most valuable real estate brand, framed this change as a strategic shift from scale to scale plus profitability. The brand also diversified into financial services and tourism. In a move designed to fill available space it linked with McDonald’s, which will accelerate its expansion deeper into China by locating restaurants on Evergrande property. Evergrande Real Estate led the category in value appreciation, 88 percent, based on significant profit growth.

 

Government regulations to slow the flow of capital overseas impacted the marketing of a Malaysia project, being developed by a consortium of real estate developers including China’s Country Garden. However, the brand experienced profit growth based on strong demand for its housing. Country Garden increased 32 percent in brand value.

 

Longfor increased 29 percent in brand value because of sales in higher tier cities and the diversity of its portfolio, which includes commercial property, like shopping malls, as well as housing. Diverse holdings also enabled R&F Properties to grow 18 percent in brand value. It recently expanded its portfolio of high-end hotels with a major of acquisition of hotels from Dalian Wanda Group. R&F also purchased office towers in London.

 

After strong sales early in the year, Vanke experienced a slowdown and government initiatives moderated market expansion. Vanke explored new growth possibilities, including developing urban transportation systems, such as monorails. State-owed Shenzhen Metro is Vanke’s largest shareholder. SOHO China increased only 1 percent in value, while Poly Real Estate and Gemdale declined. And one real estate brand, Greenland Group, joined the ranking for the first time.