(Yicai) March 21 -- China’s biggest real estate developers endured another 12 months of dwindling earnings last year, with the average profit margin nearly wiped out, as sales slowed and property prices fell, according to a new report.

The mean net profit margin at the leading 100 developers was only 1.1 percent in the year ended Dec. 31, while the average return on equity was just 0.3 percent, according to a research report by the China Index Academy released yesterday.

The unexpected degree to which home prices declined in recent years has squeezed net profit margins, so earnings are likely to keep falling in the short term, the report noted.

Average operating income dropped 9.4 percent to CNY33.8 billion (USD4.7 billion) in 2024, while average net profit plunged 77 percent to CNY420 million (USD58 million).

Generally high land acquisition costs in previous years, coupled with last year’s decline in home prices, further squeezed the profitability of newly launched projects, the report said.

Profit shrinkage was a common theme last year. Among the more than 90 builders publicly traded on the Shanghai, Shenzhen, and Hong Kong stock exchanges, only a third expect to have made a profit, while the rest anticipate varying degrees of red ink, including both first-time and ongoing losses, according to data from Wind Information.

The 100 developers sold CNY3.95 trillion (USD544.5 billion) of property, down 26 percent, the CIA report showed. The share of sales by state-owned builders increased to 69.8 percent from 67.5 percent.

Major cities are increasingly becoming the main revenue streams for real estate companies. The top builders’ share of sales in China’s four first-tier cities -- Beijing, Shanghai, Shenzhen, and Guangzhou -- jumped to 31.2 percent last year from 27.6 percent the year before, per CIA data. Their investment in land in the first-tier cities made up 26 percent of the total, up from 21.6 percent.

Against the backdrop of declining sales and profits, improving the financial health of the top 100 companies has become increasingly challenging. Their average asset-liability ratio, excluding advance receipts, was unchanged from the prior year at 65.3 percent, while the average net gearing ratio rose to 96.3 percent from 90.8 percent.

The report pointed out that while the scale of maturing bonds in the real estate sector has declined from recent highs, alleviating some debt repayment pressure, developers still face major repayment challenges due to the lack of a sales rebound. CNY774.6 billion (USD106.8 billion) comes due this year.

Editors: Tang Shihua, Martin Kadiev