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June 8, 2015

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Home » Business » Real Estate Special

Onward and upward in the housing market

By Cherry Cao | June 8, 2015, Monday | Print Edition

A burgeoning recovery in China’s residential property market will likely be strengthened by supportive government monetary and regulatory policies, though the picture is likely to be patchy on a regional basis.

Rating agency Moody’s announced earlier this month that it was changing its outlook on China real estate to “stable” from “negative.”

“We expect modest year-on-year growth of up to 5 percent in nationwide property sales to June 2016, compared with a decline of 7.8 percent in 2014,” said Kaven Tsang, Moody’s vice president and senior analyst.

Tsang credited the policies implemented by government authorities since the second half of last year.

“Growth in volume will moderate downward pressure on selling prices, resulting from the high level of housing inventory, mainly in lower-tier cities,” Tsang said.

Indeed, it was a mixed picture across the nation in data released earlier by the National Bureau of Statistics.

Nationwide, housing prices in April rose for the first time in 10 months, according to the bureau’s tracking of 70 major cities.

“Prices of new homes rose an average 0.3 percent in April,” said Liu Jianwei, a senior statistician at the bureau. “However, price increases were mainly confined to first-tier and a limited number of second-tier cities, whereas the rest still suffered declines.”

Shenzhen in Guangdong Province recorded a month-on-month increase of 1.8 percent in April, the largest gain among the four first-tier cities. In Beijing, prices rose 0.8 percent, while gains in Shanghai and Guangzhou were 0.7 percent and 0.4 percent, respectively.

“We’ve seen a solid recovery in first-tier cities and core second-tier cities in both volume and price, and we do expect the rally to extend at least through the end of this year,” said Chester Zhang, associate director at Savills China research. “In those cities, demand from ‘upgraders’ will be particularly robust. Smaller cities will also see their inventory gradually reduced over the next couple of months despite at a slower pace.”

Increased availability of mortgages, lower down payments and more attractive lending rates are available for people who want to finance the purchase of second homes. The easier money comes after the People’s Bank of China, the country’s central bank, reduced the ratio of deposits commercial banks have to hold in reserve and pared interest rates three times since November.

The area of new homes sold in May in Shanghai climbed 14.7 percent from a month earlier to nearly 1.43 million square meters, a 26-month high, according to a report released earlier by Shanghai Uwin Real Estate Information Services Co.

The average price of new houses, excluding government-subsidized affordable housing, jumped 7.9 percent from April to 31,832 yuan (US$5,134) per square meter, the highest ever recorded in Shanghai, Uwin said.

According to Shanghai Deovolente Realty Co, medium-priced to high-end homes accounted for more than half of the transactions completed in May, with 51 percent of new houses sold at a minimum of 25,000 yuan per square meter. That was up 5.9 percentage points from April and a rise of 12.6 percentage points from a year earlier.

In the luxury segment, a record 1,153 new residential units, with an average price of 50,000 yuan per square meter and above, were sold in the city last month. That was a five-fold increase from the same period a year earlier.

Among those units, 54 cost more than 100,000 yuan per square meter, more than double the number in April, Deovolente said.

Strong sentiment has spilled over into the city’s existing housing market as well.

Transaction of existing properties, the majority of which were residential units, rose 1.6 percent in May from April to 38,800 units, Deovolente said in a separate report.

“The local inventory of existing houses exceeded 90,000 units at the end of last month, up from 83,700 units at the end of April,” said Lu Qilin, a Deovolente researcher. “This further increase in stock should indicate a long missed housing boom.”

The average cost of new homes in 100 Chinese cities in May edged up 0.45 percent from a month earlier to 10,569 yuan per square meter, according to China Index Academy, a leading independent property research organization in the country. It was the first month-on-month increase since February.

Nationwide, prices rose in 48 of the 100 cities, a rise of nine from April, the report showed. Prices fell in the remainder.

Real Estate Special


 

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