China Real Estate Information Corporation (CRIC – a subsidiary of E-House) released estimated 9M17 sales data for the country’s top 100 property developers (LINK). Xinyuan China is shown at #75 with estimated sales of 15.8Bn RMB year-to-date, which means 6.56Bn RMB for 3Q.
CRIC does not have access to any official company records and compiles its estimates from 3rd party sources like municipal data. “Sales” estimated by CRIC are never going to equal “contract sales” reported under US GAAP financial statements and “contract sales” are also different from “revenues” reported by Xinyuan under percentage of completion accounting. Some of the sales in the CRIC data do not end up being closed and some are recognized in later periods (Xinyuan does not book a “contract sale” until it has received 30% of the price in cash). Even though the numbers don’t match, CRIC data in prior quarters has been a good indication of the trend in Xinyuan results:
Several Chinese cities have recently announced new real estate market restrictions and banks have been pressured to tighten lending policies (LINK). A side effect of previous policies intended to limit price appreciation has been to reduce perceived risk of new home purchases. If demand has been artificially restrained then eventual relaxation of policy will bring higher prices so speculative investment seems attractive. The new policies attempt to discourage such buying through mandatory holding periods. The outlook for property developers such as Xinyuan will remain positive so long as demand remains strong. The greater risk would come from a surge of home inventory available for sale and this is not yet evident.