Clichés are often true, and at the moment this one is apt: the Chinese word for crisis also implies opportunity. On Friday, Hong Kong- and China-listed property developer China Vanke announced first-half results. Revenues rose one quarter — mostly on volume growth; average prices were down just shy of 3 per cent.
Along with peers China Overseas Land and Investment and China Resources Land, Vanke trades on single-digit multiples of 2015 earnings, for growth in the low to mid teens. Cheap? That depends where we are in the cycle. Since April, property prices have merely stopped falling. If they resume their tumble, the low multiple will prove painfully deceptive.
China’s economy looks shaky, with last week’s adjustment to the renminbi taken as a sign that it could be worse than feared. Still, macro data have been poor for some time — yet Vanke’s numbers were far from terrible. This year, supply has fallen much more sharply than demand. Figures from China’s National Bureau of Statistics show completed residential projects’ gross floor area (GFA) down 16 per cent year on year, even as the GFA of residential sales rose 7 per cent. The GFA for new projects commenced — which would become available in about a year — has fallen by nearly a fifth. Land purchases have collapsed by a third.