Minggu, 03/05/2009

Chinese Property Market Regains Breath

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Chinese Property Market Regains Breath

CHINA IS NOW LIKE SOMEONE whose heart stops for a while before returning to normal. In March, such a sign of life was visible in China. Housing prices picked up for the first time after the global financial crisis reached China. But, although housing prices rose, the commercial property sales were small. Government support was expected to boost housing sales. Data at the national statistics bureau shows that average prices in 70 cities in China rose 0.2 percent in March. The monthly increase is viewed as signaling the recovery of the Chinese property industry after seven months of decline due to the global financial crisis. Despite price hikes, property price indices were still 1.3 percent lower than in March of last year. In the first quarter of this year, the total value of property at the national level reached US$74.5 billion, up 23.1 percent from last year.

Real estate sales rose 8.2 percent from last year to 113.09 sqm, equivalent to around 135.71 square yards. Also, residential housing prices also picked up 8.7 percent. Unfortunately, commercial property sales were not as good as the housing sector. Commercial property sales relatively remained weak. Office space sales declined 13.1 percent.

Overall, property sales in China dropped during 2008. Early 2009 was expected to be a turning point for the property market to improve. That expectation began to materialize. Above data shows that property prices in China remain low as compared with the levels before the crisis hit China. But, prices tend to become stable at the moment.

Michael Klibaner, head of China research at Jones Lang LaSalle, said that the market had got better because of government support. “The government measures to improve affordability have had a very big impact. Between lower interest rates, lower transaction costs and lower down-payment requirements, affordability has improved enough that the number of people that can participate in the market has increased a lot. To us, that means that this recovery can last more than a month or two and will be more sustainable,” he said.

Last year, the government gave support to improve the real-estate market including the reduction of the percentage of down-payment from 30 percent to 20 percent of property prices. In January and February, total property sales throughout China rose 1.1 percent from the previous year. Property consulting firm, Soufun, said that in large cities property transactions also rose over the past several weeks. This is an encouraging development considering that in 2008 sales declined 20.3 percent.

Mei Jainping, a professor of finance at the Cheung Kong Graduate School of Business in Beijing, said, “The Chinese housing market may have a good chance to be among the first ones to see real signs of picking up”. Although the Chinese property market is showing signs of recovery, several experts warn that the present condition is temporary because the value of real-estate assets may further decline 40-50 percent within the next two years, due to oversupply. “Property sales are in an early recovery in major Chinese cities as prices drop to an acceptable range for some buyers.

However, property prices may need to drop another 5 to 10 percent to ensure a sustainable recovery in both sales and property investment,” said Xing Ziqiang, an economist at China International Capital in Beijing. Cao Jianhai, a professor at the Chinese Academy of Social Sciences, agrees with Xing. He said that the present condition is not yet stable and has been influenced by liquidity flows and not by real demand.

Cao also noted that the present condition may not last longer and that prices may go down further next year before stagnating for a number of years. Cao also stressed that averaged property prices in China were 10-20 times the averaged income of the Chinese people. As a result, around 60 percent of buyers have to seek money at pawn houses.

Vanke, Cina’s largest property developer, agrees that, despite the positive signals of recovery in large cities, the general condition of the Chinese property market remains weak. Indeed, real-estate prices still shows signs of recovery, but several other activities are not yet picking up. At the national level, property project development declined 14.8 percent in the first two months of 2009.

Also, developers’ land ownership is still low. Several economists predict that the Chinese property condition will pick up in the second semester of this year. But, property business players said the market will weaken even further. Hingyin Lee, Colliers’ director of research and advisory for east China, said that at this time property buyers are influenced by government policies.

He said, “Despite the fact that some pent-up demand was released by the encouraging policies, most home buyers still maintain a wait-and-see attitude. Thus, it has yet to (be concluded) whether the residential property market has stabilized.” Maybe it is better to maintain a wait-and-see stance before deciding to buy property in China. All the positive signals that are actually temporary could be an euphoria only. As the present market condition is still unstable, buyers need to be wise enough in making investment. (NS)