China Vanke announces a profit increase of 21%.

 One of China's leading property developers, China Vanke Co., declared a 21% increase in annual earnings, citing increased sales of small and medium-sized homes. Buy

The mainland developer's net income increased to 15.12 billion yuan ($2.5 billion) in 2012, up from 12.55 billion yuan the previous year. The Shenzhen-based corporation reported a 32 percent growth in revenue to 127.5 billion yuan.

Due to government property limits implemented last year, earnings increased more than economists expected. Higher sales of small and medium-sized businesses, which are less affected by curbs, enable the company to profit, according to the company. Around 91.5 percent of the company's initiatives last year were residences under 144 square meters.

"By sticking to its end-user-oriented product positioning and vigorous sales promotion, the company achieved sustained growth in operating results," Vanke President Yu Liang said in a statement.

Despite government efforts to moderate the market, home prices rose by 12% in December, the largest gain since 2013.

However, price increases have slowed, indicating that the price controls are finally having an effect. If housing prices continue to grow, government officials may increase property restrictions even more.

According to The Wall Street Journal, China Vanke may list in Hong Kong as soon as this summer, after relocating from China's B-share market. It would be listed "by introduction," which means it would not raise additional capital or issue new stock.

 

Globally, rising steel costs have an impact on construction costs.

Steel prices are expected to rise at a 2.2 percent annualized pace over the next three years, according to IBISWorld, due to increased demand from the rebounding construction industry and high-growth real estate markets such as Shanghai, Beijing, Tokyo, Dubai, Abu Dhabi, New York, and Miami. As a result of the increased demand, price is under pressure, resulting in an increase in steel-related building items.

Steel, being a primary input for a variety of construction and industrial equipment goods, experienced severe price fluctuation during the Great Recession. Steel consumption fell 25.1 percent in 2009 as the building and industrial industries collapsed. Steel prices rebounded strongly during the next two years, but the recovery was short-lived. As a result, IBISWorld anticipates a 3.8 percent yearly reduction in steel prices from 2011 to 2014.

Lower steel prices have slowed the rise in prices for products used in construction and industry. Buyers should expect higher pricing for steel-based items in 2017, as steel prices are expected to rise over the next three years and construction and industrial activities are expected to stay strong.

Security wire fencing, nails, elevators, building demolition gear and equipment, and forklifts are among the top five major products identified by IBISWorld as expected to experience increased price rise over the next three years due to increased steel prices.

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