China's economy may have cooled from the double-digit growth
of the past decade, but its housing market has stayed hot.
Homeownership has turned into one of the most popular vehicles
for investment in China amid increasing demand from the country's
rapidly growing middle class, says Virendra Singh, director of
economic research at Moody's Analytics. The rapid urbanization in
China and increased population of city dwellers, he adds, have
also created the increased need for housing.
Singh says the housing market has been hot for more than three
years and continues to gain momentum. Total property investment
in China, which is mainly by private developers, in residential
and commercial real estate rose 20% vs. a year earlier to $600
billion in the 2013 first half, says Singh, citing data from the
National Bureau of Statistics of China. Residential and
commercial property sales in the year's first half shot up 43.2%
from the prior year to roughly $585 billion, he says.
The rapid growth in China's housing market has been good news
for Beijing-basedSouFun Holdings (
). It's China's largest real estate Internet portal in terms of
the number of page views and visitors to its websites in 2012.
SouFun provides marketing, listing, e-commerce and other
value-added services and products for China's real estate
SouFun has been seeing impressive growth since going public in
September 2010. It's posted double-digit sales growth for 11
straight quarters, and double- and triple-digit profit growth in
all but one quarter over the same time frame. First-quarter
profits soared 135% to 40 cents a share. Revenue rose 56% to $91
Analysts polled by Thomson Reuters expect SouFun to keep up
its double-digit profit growth when it reports second-quarter
results on Thursday. They forecast SouFun's earnings will rise
17% to 54 cents a share.
That would be a slower pace than it saw the prior three
quarters. Analysts see sales rising 21% to $117.4 million.
T.H. Capital analyst Tian Hou sees the second quarter turning
out better than the Street expected.
The reason? "When they gave guidance for the quarter and full
year, they were cautious," she said. "However, the housing market
moved up more aggressively than their cautiousness."
The reason for the company's caution was related to the
implementation of value-added sales tax policies in March. The
housing market's transaction volume dropped significantly in
April as the policies began to take effect, Hou wrote in a
report, following the company's first-quarter earnings report on
May 8, when it gave guidance.
But in May and June the market's transaction volume improved,
SouFun benefited from growth in its listing services and its
e-commerce business in the first quarter. Revenue from listing
services soared 145.4% to $26.8 million primarily due to
increased property listings from agency subscribers. The increase
in listings was partially driven by the announcement of the
housing-related government policies, which resulted in a
significant increase in secondary home market transaction volume,
the company says.
E-commerce sales surged 118.9% to $26.4 million due to the
increase in property purchases through its SouFun membership
SouFun offers a membership card that offers its members free
and paid services. The paid membership service allows members to
buy residential property at a discount from partner developers.
The amount of the discount and the cost to get it vary by
"There is strong demand in housing, and the discount is not
small," said Hou. "If you are sure you're going to buy an
apartment, why not pay to get the discount?" SouFun began
offering the paid SouFun card membership services to property
buyers to facilitate their transactions with property developers
in the second quarter of 2011, the company said.
"This innovative service has been tested very effective in
primary property transactions," SouFun said in a statement.
Hou says there are more than 100 developers participating in
the discount program.
Analysts expect SouFun to keep up its momentum. They see
full-year profit rising 24% to $2.53 a share. They forecast an
18% increase in 2014.
"In general, China has a high housing demand," said Hou.
"People don't like to rent. They like to own."
Housing, she adds, has become a "savings" vehicle for a lot of
"It's a major way for ordinary people to invest," she