Real es­tate prices to slow amid var­ied poli­cies

China Daily (Canada) - - BUSINESS - By HU YUANYUAN huyuanyuan@chi­nadaily.com.cn

China’s real es­tate pol­icy will be more dif­fer­en­ti­ated in 2014, while the growth in prices is ex­pected to slow down, in­dus­try an­a­lysts said on Thurs­day. In the near term, hous­ing pol­icy ad­just­ments will be mainly at the lo­cal level be­cause of re­gional dif­fer­ences, ac­cord­ing to REICO, the re­search in­sti­tu­tion jointly cre­ated by the China Real Es­tate Cham­ber of Com­merce and the China Ur­ban Re­al­ity As­so­ci­a­tion Fund. In­no­va­tive lo­cal­ized mod­els to ad­dress hous­ing dif­fi­cul­ties such as shared own­er­ship be­tween the govern­ment and buy­ers will be en­cour­aged.

First-tier cities and some se­cond-tier cities where hous­ing prices have grown fast in­tro­duced new tight­en­ing mea­sures, mainly through adding re­stric­tions on home pur­chases and mort­gage lend­ing or by be­ing more re­stric­tive in ap­prov­ing pre-sell per­mits.

Ac­cord­ing to the coun­try’s largest real es­tate por­tal owned by Sou­Fun Hold­ings Ltd, home prices rose 22.2 per­cent in the top four cities (Bei­jing, Shang­hai, Guangzhou and Shen­zhen) in De­cem­ber, 9.2 per­cent in se­cond-tier cities (mainly pro­vin­cial cap­i­tal cities) and 5.3 per­cent in third-tier cities.

In Bei­jing, Shang­hai and Shen­zhen, av­er­age hous­ing prices all ex­ceeded 30,000 yuan ($4,839) per square meter, while those in third-tier cities were 7,330 per sq m.

“The di­ver­gence of hous­ing price dy­nam­ics across re­gions re­mains the key theme in 2014,” said Zhu Haibin, China econ­o­mist with JPMor­gan Chase.

The vary­ing per­for­mances across dif­fer­ent cities are mainly driven by de­mand-sup­ply con­di­tions at lo­cal lev­els.

First-tier cities gen­er­ally face an un­der-sup­ply sit­u­a­tion be­cause of stricter tight­en­ing on pur­chas­ing abil­ity, less sup­ply and stronger de­mand. By con­trast, new sup­ply in­creased faster in smaller cities. As de­mand tends to be sticky in smaller cities, it takes time to di­gest the in­crease in new sup­ply and hence hous­ing prices could face down­ward pres­sure in com­ing years.

Be­cause the hous­ing sup­ply will pick up this year, ow­ing to more new-start con­struc­tion in 2013, in­dus­try an­a­lysts said home price growth will slow down this year.

“We be­lieve over­all prop­erty price growth will be tem­pered by more new sup­plies and the high base in 2013. And we ex­pect prop­erty prices to grow 5 to 10 per­cent in first-tier cities, and 3 per­cent in se­cond-tier cities, but be flat for other cities in 2014,” said Jef­frey Gao, an an­a­lyst with No­mura Se­cu­ri­ties Co Ltd.

Mean­while, China’s real es­tate mar­ket will fur­ther con­sol­i­date this year, with ma­jor de­vel­op­ers ex­pected to out­per­form de­spite a tougher mar­ket than 2013, a re­port from No­mura Se­cu­ri­ties showed on Thurs­day.

Based on No­mura Se­cu­ri­ties’ study, the top 20 de­vel­op­ers had al­ready gained a to­tal mar­ket share of 22.9 per­cent by the third quar­ter of 2013, com­pared with 17 per­cent in 2012 and 18 per­cent in 2011.

“We fa­vor names that rep­re­sent big scale be­cause they have ad­van­tages in fi­nanc­ing and land ac­qui­si­tions and have proven track records,” said Gao.

“In ad­di­tion, we don’t see a sales cap for top de­vel­op­ers so far. A good en­try point should ap­pear in late Fe­bru­ary or early March, with po­ten­tial cat­a­lysts from strong 2013 re­sults, eas­ing of mort­gage loans and good Jan­uary and Fe­bru­ary sales,” Gao said.

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