HONG KONG (Reuters) - Developers China Overseas Land & Investment Ltd (HK:0688) and Country Garden Holdings Company Ltd (HK:2007) on Wednesday reported solid growth in 2016 core profit thanks to robust demand for homes in China's red-hot market.
The companies were the first major developers to report their 2016 results after Beijing stepped up moves to cool the market on concerns about a bubble, which could weigh on the developers' margins this year.
"The group is cautiously optimistic about China's property market in 2017. It is expected that policy regulation by the central Chinese government will continue," China Overseas Chairman Xiao Xiao said in a statement.
"China's property sales are expected to experience some resistance in the first half of 2017 as market consolidation accelerates, with the sector overall presenting both challenges and opportunities."
China's No.3 developer Country Garden said core profit jumped 22.3 percent to 12 billion yuan ($1.74 billion), beating analysts' estimates as demand spilled into smaller cities where it focuses.
China Overseas Land, the nation's No.6 developer by sales, said its core profit rose 13.8 percent to HK$31.37 billion, lagging expectations after its acquisition of CITIC Ltd's (HK:0267) residential property business.
Despite its cautious optimism, state-owned China Overseas set a modest sales target for 2017 of at least HK$210 billion, the same level it achieved last year.
Country Garden, however, has said it plans to double its sales this year thanks to stronger growth in smaller cities and a bigger slate of projects due for completion.
China's property market, which accounts for about 15 percent of the country's gross domestic product, picked up in February after price gains had slowed in the previous four months.
Average new home prices in 70 major cities edged 0.3 percent higher from January despite a raft of government curbs aimed at tempering speculation.
Some local authorities have imposed price limits on sales, for example by capping a developer's selling price at a certain percentage increase over a neighboring development.
Even so, a Reuters survey showed that major companies plan to continue expanding their land investments in 2017 in order to grab market share.
Deutsche Bank (DE:DBKGn) analyst Jeffrey Gao said in a report this week he expected listed developers would maintain more than 15 percent sales growth this year, outperforming the overall sector's decline of 5 percent to 10 percent, due to their sizeable saleable resources and better execution.
After the results announcement, shares of China Overseas Land and Country Garden both extended losses, falling 3.8 percent and 2.8 percent respectively. The broader Hong Kong stock market (HSI) dropped 1.4 percent.