Since the beginning of the year of the goat, we see alarming titles in the news about the real estate market in China, raising issues such as oversupply, home prices decline, housing sales remaining flat, investment drop … some newspaper even talk about a real estate market crash in China.
Those news are not a good sign, even more because the real estate sector has been the most significant contributor to growth in China for the past years. From 2008, to curb the effects of the worldwide economic crisis, Chinese government has eased the credit conditions, resulting in a boom in construction sector. Home prices have tremendously increased during that period. Now the challenge is to ensure long-term health and sustainability of the real estate market in China in order to support the GPD growth.
The new construction in China has decreased by 10% in 2014 compared to 2013. Besides, there is more supply than demand on the market. The commercial buildings are also in the scope: high in-occupancy rates and millions of unsold surfaces, from130 million square meters in 2013 to about 620 million square meters by the end of 2014.
Economists recommend to stop the construction for about 2 years, in order to allow the demand to catch the offer, while easing the credit conditions as well as adjusting policies, not only for acquisition but also in the design of the property tax, which doesn’t exist yet in China and should be implemented by the end of this decade.
For 2015, the housing market remains morose, in spite of the measures taken to reverse the curve, such as cut-downs of credit interests or regulation changes in property purchase. New homes prices keep decreasing in most of the cities, and the trend is the same in existing home prices. New measures could be implemented in some cities, such as down payment reduction for second homes. Government is also thinking about measures to ease the first-home buyers or the buyers looking for home upgrade.
However, the restrictions on home buying are not going to be lifted in spite of rumours. Shanghai will not lift restrictions on home buying on April 1st 2015, as some were expecting.
The government is also taking measures to ease the access to property of low-income people, both in rural and urban areas. This is part of the measures announced by Premier Li Keqiang on March 15th.
Premier Li also mentioned about the measures taken to ensure the full convertibility of the RMB, another step to open the Chinese financial market, as well as encouraging Chinese to do real estate investment abroad.
Sources:
http://www.businessinsider.com/emerging-market-debt-has-surged-since-the-start-of-the-financial-crisis-2015-1
http://www.chinadaily.com.cn/business/2015-03/18/content_19841672.htm
http://www.chinadaily.com.cn/business/2015-03/17/content_19828099.htm
