Land King Fallout: Developer Revenue Up, Profit Down as Construction Costs Soar

With real estate activity shifting into the higher-tier cities, construction costs are soaring.

For example, the phenomenon of rising sales does not increase profits, from 2015 or even earlier, a number of large housing developers' rising revenue does not increase profits phenomenon has occurred. Even in the first half of this year, sales and prices increased, a lot of developers' profit actually fell, for example, a large listed developer net profit of 5.351 billion yuan, an increase of 10.42 percent, the real estate business gross margin was 17.55 percent, a 3.49 percentage point decrease over the same period in 2015.

An important cause of increased sales does not increase profits, is related to developers continuously rising costs, in addition to labor costs, land prices led to rising costs has intensified. Centaline Property Research Center statistics show that: As of August 22, during the year to grab the most active developers to get to a total of 734.94 billion yuan in land, the total construction area of ​​113.1 million square meters, has an average cost of 6498 yuan per square meter. In the same period in 2015, to take the average cost of only 4261 yuan per square meter. That is to say, land grabbing developers average cost increase reached 52.5 percent.
iFeng: 火爆、新高、售罄 楼市高歌猛进下的隐忧

And if the real estate market has already turned and sales fall along with prices....

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