China Evergrande’s moves spur competition


  • Business
  • Tuesday, 03 Mar 2020

Setting standards: An exterior view of China Evergrande Centre in Hong Kong. Aggressive promotions and online sales by the company are expected to put pressure on others firms. - Reuters

HONG KONG: China Evergrande Group, the country’s No 3 developer by sales, surprised the market on Sunday when it said it sold more than 99,000 units worth 102.7 billion yuan (US$14.7bil) online in February, boosted by aggressive promotions, despite the coronavirus outbreak.

Initiatives including allowing a deposit of as little as 5,000 yuan – with the option to cancel and get a refund – helped Evergrande recorded bumper transactions in a nearly frozen property market.

Aggressive promotions and online sales by Evergrande are expected to put pressure on other real estate firms to follow suit, intensifying competition in the cut-throat real estate market.

Data from property researcher CRIC, which tracks the official online registration system and does not include company’s online subscriptions, recorded a much lower figure of 47 billion yuan worth of home sales.

While the data from CRIC, which compiles a sales league table each month, raises questions over whether deposits will actually become sales, analysts expect competition to ramp up in the coming months.

According to CRIC, Evergrande was still the top performer in February, with contracted sales surging 118% from a year ago.

Country Garden and China Vanke trailed with 30 billion yuan and 28.6 billion yuan sales, respectively.

Evergrande’s doubling of sales also outperformed a 30% decline of the top 30 developers’ sales during the month, data showed.

Official February national sales figures are due in mid-March, and analysts had expected a slowdown in sales this year due to a cooling economy.

Evergrande said in mid-February it would offer 25% discounts for all properties until the end of the month, and introduced electronic contracts to boost online sales, as the coronavirus keeps physical offices shut and potential buyers at home.

For March, although the discount has been reduced to 22%, the developer has lowered the deposit amount to 2,000 yuan from 5,000 yuan and guaranteed a full refund until May 10.

It has also enhanced the referral programme by offering 35,000 yuan plus 1% commission per purchase.

While industry participants said Evergrande could risk a spike in cancellations later, analysts said the promotions give the developer an early advantage to grasp customers.

Rivals including Sunac China have also rolled out refund measures.

However, none have offered promotions on the scale of Evergrande.

“For a sector that replies on high turnover, Evergrande’s promotion strategy will inevitably give pressure to other developers, ” said CRIC head of Hong Kong research David Hong.

He expects price competition to heat up in the next two months.

Evergrande declined to comment. — Reuters

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