China Index Academy (a research unit of Soufun) released its monthly report of new home prices in 100 top Chinese markets (LINK). On a national basis average selling prices rose 1.9% for the month and 7.4% from one year ago.
Data for Xinyuan’s markets are in the table below:
The Central China markets have been steady performers. These cities have strong economic potential supported by good transportation infrastructure and labor supply. The Xinyuan brand is well-known in this region and the company has phased development plans in cooperation with local governments enabling a predictable supply and price for future land acquisitions.
The Tier 1 cities have been China’s strongest markets. The cities are crowded and expensive, but offer the best jobs and cultural environment. Participation in these projects benefits the Xinyuan brand image. High land prices may inhibit Xinyuan’s appetite for acquiring a new project in 2016.
The Jiangsu Province cities close to Shanghai have been very strong in recent months. These areas offer many of Shanghai’s advantages (good job prospects and cultural environment) in a more comfortable and affordable living environment. Expanding transportation links provide easy access to Shanghai by high-speed rail and subway (from Kunshan). High land prices may inhibit Xinyuan’s appetite for acquiring a new Jiangsu project in 2016.
Xinyuan’s other Chinese projects are in cities with high economic growth, but where real estate markets have a short-term oversupply of inventory. Prospects for earning a reasonable return in Changsha have improved with faster sales in 2H15 and ASPs may be rising a bit in 2016. The vacation market of Sanya has been weak, perhaps due to rising Chinese interest in international travel. Disappointing sales at Xinyuan’s project may be due to inexperience in marketing of a higher-end leisure property which is different from the company’s main emphasis on middle class homes.
Note that “Xinyuan Inventory” by city was derived from the table in Xinyuan’s earnings report titled: “Real Estate Project Status in China” (LINK)
Note that Xingyang is classified as a small city, but is effectively an outlying area of Zhengzhou.