What’s new: Property management companies in China are seeing their business gradually recover after severing ties with troubled developers and adjusting business strategies.
Data from the China Real Estate Information Corp. (CRIC) showed that 56 property management firms reported a 7.27% increase in average net profits in 2023, reaching 295 million yuan ($41 million) and reversing a 34.7% decline from 2022.
The improvement mainly reflects property managers’ slowed growth in accounts receivable, most of which are caused by businesses with affiliated, debt-ridden property developers. Fifty-five listed property managers disclosed their 2023 accounts receivable averaged 1.6 billion yuan, marking a 13.45% year-on-year rise but a 19.9 percentage point drop from 2022, CIRC data showed.
From 2020 to 2022, the annual growth rate of accounts receivable for listed property management companies was over 30%.
Most property management companies now earn more than half their income from third parties, reducing their reliance on affiliated developers.
Background: Most of China’s largest property management companies were spinoffs from real estate companies and often rely on affiliated developers as a significant source of revenues, including management and maintenance services for their projects.
As China’s property industry crisis has persisted since 2021, property managers’ financials are coming under mounting pressure. “If affiliated real estate companies face financial challenges and are unable to fulfill their financial commitments to property management firms, the likelihood of recovering the money is small,” said Dennis Huang, co-founder of Synergy Solution Management Group.
Leading property managers have written down billions of yuan over the past two years for businesses with affiliated developers. For instance, Country Garden Services Holdings Co. Ltd., China’s largest residential property manager, wrote down an impairment provision of 2.2 billion yuan in 2023 after Country Garden’s debt crisis became worse.
