Key Takeaways
A Shenzhen property launch by China Res Land and China Merchants Shekou saw a sell-through rate of over 90 percent, pulling in more than RMB 6 billion in subscriptions and signaling robust demand in China’s high-end housing market.
"The strong sales performance highlights CHINA RES LAND’s brand execution and pricing power, supporting its positive view on the recovery of the property development business," HSBC Research said in a note, maintaining its Buy rating and HKD 37.7 price target on the developer.
The "Guanchao" project, launched April 26, achieved an average selling price of approximately RMB 140,000 per square meter, a premium of 10 to 20 percent over prices for nearby secondary homes. The successful launch supports HSBC's forecast that projects in tier-one cities will constitute about 31 percent of the company’s contracted sales this year.
The result provides a crucial data point on the health of premium real estate in China's top cities, suggesting that well-capitalized developers with strong brand recognition can still command pricing power despite broader market concerns. Sustained high sell-through rates could provide momentum for earnings growth and margin expansion for the remainder of the year.
HSBC Research expects China Res Land's focus on top-tier cities to be a primary earnings driver. The bank's analysts project that sales from Shenzhen, Shanghai, and Beijing will contribute 12 percent, 11 percent, and 8 percent, respectively, to this year's contracted sales.
New projects in these cities typically deliver gross margins in the high double-digits. As the company demonstrates the ability to raise selling prices, as seen with the Guanchao project, analysts see potential for further gross margin expansion. This performance in the primary market is a key indicator for the sector, which has faced headwinds from regulatory controls and shifting buyer sentiment. The strong reception in a competitive market like Shenzhen reinforces the company’s position as a market leader.
This article is for informational purposes only and does not constitute investment advice.
