Sunac China Holdings Ltd., one of the most active real estate buyers in China, is currently negotiating to buy more land from other developers, Chairman Sun Hongbin announced, as reported by Bloomberg.
"We're in talks on many, many projects, big and small," in cities including Beijing and Shanghai, Sun said in an interview in Beijing. Compared to open auctions where parcels of land have been sold at higher prices, Sun said "the prices are all fairly reasonable."
Among the 10 Chinese developers with the most acquisitions this year, Sunac has five deals that total almost $600 million, while Evergrande Real Estate Group Ltd., the biggest acquirer, has four deals worth $5.8 billion, according to data compiled by Bloomberg.
Sun said that it is managing its cash flows well to keep it "very safe."
In 2014, buyers started to actively buy land in China's biggest cities, as the housing market recovered due to policy easing, until it spread to smaller cities. In 29 second-tier cities, which include provincial capitals such as Nanjing, the average price of residential land increased 77 percent in the first quarter of 2015, SouFun Holdings Ltd. said.
"While home prices in cities like Beijing, Shanghai, Nanjing and Suzhou are not yet a bubble, there's already a bubble in their land prices," Sun said. "If developers want to make money based on those land prices, home prices will have to go much, much higher."
On Thursday, May 19, the company said that it is buying seven projects from Top Spring International Holdings Ltd. for 4.39 billion yuan ($671 million) to enter Shenzhen, southern China's business hub. It cancelled its deal with Kaisa Group Holdings Ltd. about a year ago after negotiations with Kaisa's offshore bondholders on debt payments were delayed.
According to SouFun, the average new-home price in the city jumped 60 percent in the past year.
Since last year, Sunac has entered more second-tier cities like Nanjing, Taiyuan and Zhengzhou to look for more affordable land parcels for its land bank. Data by SWS Research Co. showed that the company has acquired about 46 projects worth 55 billion yuan in 15 months. SWS analyst Kris Li reported in March that it is still unclear if the acquisition would bolster Sunac's gross margin, which declined 5 percentage points last year.
Lou Yanqing, deputy general manager of Sunac's Beijing operations, said that Sunac is selling one of most expensive residential units in Beijing, One Sino Park, for an average of about 170,000 yuan a square meter.
Lou added that the company also sold eight of 52 apartments in the 227-unit development in the first week of May with a total of 500 million yuan in contract sales.
Government data released in April showed that home prices increased in 65 of 70 Chinese cities, with prices in second-tier cities exceeding those in larger hubs.