Chinese real estate enterprises' capital flow has been under great pressure this year, with mergers and equity transfers occurring frequently in the second half of this year, a trend which analysts expect to continue in 2019.
More than 30 small and medium-sized developers had transferred bonds and equities in the second half of the year, while among public companies, 46 property mergers and acquisitions were reported, with a total transaction value of 48.9 billion yuan ($7.07 billion), according to data released by Shanghai-based information provider Wind Info.
"Real estate companies have been under unprecedented great pressure in recent years, and there is no sign of relief as local governments' tightening policies are taking effect. Selling property assets could help alleviate the cash flow pressure of developers," said Zhang Dawei, chief analyst at Centaline Property Agency Ltd.
Many real estate projects in third and fourth-tier cities have been put on sale by developers due to weak profitability, according to the China Securities Journal report.
Shijiazhuang Dongfang Thermal Power Group Co Ltd, a subsidiary of the State Development & Investment Corp Ltd, is looking for a buyer for its 60 percent stake in Shijiazhuang Dongfang Yuanshun Real Estate Development Co Ltd. The selling price for the 60 percent stake is 1 yuan, and 536 million yuan for the 592 million yuan creditor's rights.
During the industry-wide restructuring, many less profitable real estate assets are being spun off by developers, who are shifting their focus to prime projects.
Speaking in late September, Yu Liang, chairman of Vanke called for carrying out all measures to keep the company afloat, but the Shenzhen-listed developer has still spent lavishly on buying projects across the nation.
Analysts suggested that under the restrictive measures, developers with healthy capital flows regard M&As as an opportunity to increase their land and project stock.
"Housing developers are under great capital pressure at the moment, and lowering prices is an option to strengthen their capital flow in the short term. But in the long term, they need to grow bigger and stronger to maintain their competitiveness," said Yan Yuejin, director of Shanghai-based E-house China Research and Development Institution.
Data from China Real Estate Information Corp showed that major Chinese property developers including Country Garden, Vanke, Evergrande and Sunac China reported total sales revenue of more than 2 trillion yuan from January to November this year. A total of 25 real estate companies saw their sales surpass 100 billion yuan, and this figure is likely to reach 30 by the end of this month.