Realty bellwether Vanke has posted a 22.5 percent year-on-year increase in the first half profit to 2.5 billion yuan. The Shenzhen-listed company, however, had to set a higher target to secure its leading position even as its archrivals sold more apartments in recent months.

During the first six months of the year, Vanke sales were around 3.49 million sq m, worth 30.76 billion yuan, up 31.2 percent and 27.5 percent respectively from a year earlier.

Although the company still leads its peers in terms of sales, its major competitors, including Poly, China Merchants Property and Gemdale, are quickly narrowing the gap, said Zuo Hongying, industry analyst, Anjian Securities.

Gemdale said its sales in the first half jumped more than 77 percent from a year earlier to 844,700 sq m, valued at 8.575 billion yuan.

Property developers have seen sizzling sales in the first half. [China Daily]

Poly sold 2.524 million sq m in the first six months this year, soaring 164.41 percent year-on-year. Explosive sales help Poly rake in a total of 21.054 billion yuan in the first half, up 168.18 percent over the corresponding period in 2008.

China Merchants Property Development, which is yet to report its interim profit, has forecast a net profit of about 450 million yuan, marking an annual growth of 105 percent.

Zuo said it is understandable that Vanke was developing slower than its counterparts over the first six months. "Being the real estate barometer, Vanke is trying to grow on a much larger base than Poly or Gemdale," Zuo said.

Additionally, Vanke is China's most commercialized property developer, with no government backing. For that reason, Vanke was seen to have taken a much more cautious approach in its development during the industry-wide slowdown in 2008. This approach, analysts said, has slowed growth during the latest market recovery.

Contrary to most analysts' expectations, housing sales in the first half sizzled, with newly developed housing supplies unable to satiate the growing demand.

Although Vanke adjusted its strategy in May and June by purchasing large amounts of land in second- and third-tier cities, it cannot make the developer's performance look better in short term.

However, State-owned Poly took a bold line in land purchase and corporate expansion, backed by the fast return of cash from housing sales, added Zuo.

Many property developers used the cash they made from sold apartments to buy more land, but analysts warned against risks of doing so.

"It's not safe to keep large stocks of land when the central government's attitude is ambiguous towards property development," Zhang Xiaobo, analyst, First Capital Securities, said.

"Summer is usually an off-season for real estate sales. The best choice now is to remain capital healthy," Zhang said.

"Vanke is not just doing business, but building a career. In that sense, it is better to be cautious when facing a lot of uncertainties," said Zhang.

Last weekend, Vanke announced that it has taken over further work of construction, sales and refund involved in the Lotus Riverside Complex in Minhang District of Shanghai. One building in the unfinished 13-storey commercial complex collapsed on June 27, killing one worker.

Investigations have so far indicated that the accident was caused by improper earth removal and excavation of an underground garage next to the toppled building.

Qian Shixin, analyst, BOC International (China) Ltd, said Vanke's involvement in the building showed the developer's confidence and management strength.

"It poses an opportunity for Vanke to show customers that it can make notorious complexes into quality projects by putting efforts," said Qian.

(China Daily August 4, 2009)