Represented by the Vanke ownership dispute that drew widespread attention, mergers and reorganizations occurred frequently within China's real estate industry last year.

A report released by the China Index Academy on the 22nd shows that in 2016, 197 domestic and overseas M&A cases were completed in China's real estate industry, involving 401.4 billion yuan (RMB, same below), with the number and scale of real estate enterprise mergers and reorganizations rising rapidly. Well-known real estate enterprises including Evergrande, Sunac and Yango carried out frequent M&A moves.

Affected by the dual pressure of macroeconomic downturn and rising land prices, the survival-of-the-fittest mechanism in the real estate industry has become increasingly evident.

Using M&A to make up for insufficient land acquisition is an important motivation for real estate enterprises to participate in industry M&A.

In March last year, China Overseas Land & Investment expanded its land reserves in first- and second-tier cities by acquiring part of the residential property portfolios of CITIC Real Estate and CITIC Pacific under CITIC (projects mainly distributed in the Bohai Rim, Yangtze River Delta, Pearl River Delta and other regions). The transaction amount of 31 billion yuan also made it the largest M&A case in the history of China's real estate industry.

Data from the China Index Academy show that in 2016, the average transaction floor price of various types of land in 300 Chinese cities was 1,904 yuan per square meter, up 40% year on year, among which the average transaction floor price of residential land was 3,349 yuan per square meter, up 53% year on year. High-priced land plots emerged frequently in popular first- and second-tier cities, and land transfer unit price records were constantly refreshed.

As land acquisition becomes more difficult and costs rise for real estate enterprises, in addition to financing in the capital market, mergers and reorganizations have become a new way for enterprises to expand their scale. Acquiring equity in real estate enterprises and taking stakes in target companies helps enterprises quickly establish a presence in core cities and improve sales performance.

For example, last year Sunac acquired all the equity of seven project companies of Top Spring International located in Sanhe, Yanjiao, Shanghai, Nanjing, Hangzhou, Shenzhen and Huizhou for 4.394 billion yuan, opening the door to entering Shenzhen and the property markets around Beijing; Evergrande also obtained a large amount of high-quality resources through frequent M&A, and last year its performance surpassed Vanke to become the industry's top player.

Other M&A cases that attracted considerable market attention in the real estate industry last year included: Vanke's 12.87 billion yuan acquisition of SCP Group; Poly's acquisition of nine projects of AVIC Real Estate; Greenland's 5.163 billion yuan stake investment in Sincere; and Jinke's acquisition of three projects of Qingdao Haier Real Estate in Shandong, among others.

The China Index Academy analyzed that through mergers and reorganizations, large real estate enterprises are gradually becoming giant companies with larger scale, while many small and medium-sized real estate enterprises face the awkward situation of a "project shortage" due to insufficient funds and strength. Some real estate enterprises that "can no longer play the game" will accelerate their exit from the market, and the industry landscape will be restructured