Guangzhou homes await place in the sun

China Daily (Canada) - - HONG KONG -

Lastt June, as Shen­zhen “cel­e­brated” its vic­tory in the main­land’sand’s “chamhomes cham­pi­onship” of monthly home-price growth rate sfor seven months con­sec­u­tively, about 150 kilo­me­ters to the north­west, in Guangzhou, the pic­ture was very dif­fer­ent.

Af­ter three months of de­clin­ing prices since March, the hous­ing mar­ket in the Guang­dong cap­i­tal fi­nally saw a re­ver­sal in June. Ac­cord­ing to the Guangzhou Mu­nic­i­pal Land Re­sources and Hous­ing Ad­min­is­tra­tive Bureau, av­er­age price for new pri­vate hous­ing in June rose 6.6 per­cent monthly, from 14,232 yuan ($2,225) per square me­ter in May to 15,177 yuan per square me­ter.

How­ever, de­spite the in­crease, that price tag was still only half the av­er­age in Shen­zhen, which recorded 30,713 yuan per square me­ter in June, ac­cord­ing to data from the Ur­ban Plan­ning Land and Re­source Com­mis­sion of Shen­zhen Mu­nic­i­pal­ity.

On a larger scale, home prices in Guangzhou are also not on the same level as the other two first­tier cities. Data from E-House China R&D In­sti­tute, a Shang­hai-based prop­erty re­search or­ga­ni­za­tion, show that av­er­age price for new pri­vate hous­ing in June was 30,022 yuan per square me­ter in Bei­jing and 34,191 yuan per square me­ter in Shang­hai.

It seems im­plau­si­ble and in­com­pre­hen­si­ble to many peo­ple that home prices in the south­ern po­lit­i­cal, eco­nomic and cul­tural cen­ter de­vi­ate so markedly from the av­er­age level of first-tier cities. But the change of ju­ris­dic­tion in some parts of Guangzhou may partly ex­plain the sit­u­a­tion.

“Av­er­age home prices in Guangzhou have been low­ered by the in­clu­sion of Zengcheng and Conghua in the cal­cu­la­tion,” pointed out Carlby Xie, head of re­search at US-head­quar­tered real es­tate con­sul­tancy Col­liers In­ter­na­tional (China).

Zengcheng and Conghua, once cities in Guang­dong in their own right, have now been re­al­lo­cated as dis­tricts of Guangzhou.

Home prices in the two newly es­tab­lished dis­tricts have stayed at a low level com­pared with the rest, es­pe­cially the six cen­tral ones of Yuexiu, Haizhu, Li­wan, Tianhe, Baiyun and Huangpu.

Ac­cord­ing to the Guangzhou bureau, av­er­age price for new

Shen­zhen is see­ing ex­po­nen­tial rise in home prices while Guangzhou, barely 90 min­utes away by train, seems to be still lan­guish­ing in the shad­ows. But all that may change soon. Zhou Mo re­ports.

home­schamhomes in the six cen­tral dis­tricts was about 30,009 yuan per square me­ter in June, with Yuexiu Yuexrict dis­trict lead­ing at 43,914 yuan per square me­ter, com­pared with­ith just 9,585 yuan in Zengcheng and 8,078 yuan in Conghua.

Low in­vest­ment sen­ti­ment and ex­ces­sive de­vel­op­ment over the past few years are two other fac­tors be­hind the phe­nom­e­non, Xie noted. “Un­like Shen­zhen, Guangzhou’s prop­erty mar­ket has been tepid. There aren’t that many prop­erty in­vestors there. Most home­buy­ers in Guangzhou are end users rather than mak­ing a pur­chase for in­vest­ment. More­over, a large hous­ing sup­ply also curbs the space for price growth,” he said.

Gap of lux­ury

The price gap be­tween Guangzhou and its peer cities is also re­flected in lux­ury apart­ments. Ac­cord­ing to a re­cent re­port by E-House, the sec­ond quar­ter recorded 79 lux­ury residential projects priced above 60,000 yuan per square me­ter in four first-tier cities.

Of these, Shang­hai ac­counted for more than a half, with the high­est price al­most reach­ing 200,000 yuan per square me­ter. Bei­jing came next, with 34 per­cent of homes at that level, while Shen­zhen ranked third with 11 per­cent. Guangzhou, mean­while, had only two such projects, with av­er­age trans­ac­tion price be­low 90,000 yuan per square me­ter.

Yan Yue­jin, di­rec­tor of re­search at E-House China in Shang­hai, said the big price dif­fer­ence be­tween Guangzhou and its peer cities owes some­thing to its de­mo­graphic struc­ture. “The wealthy group is rel­a­tively larger in Bei­jing and Shang­hai, com­pared with that in Guangzhou. Those peo­ple have stronger abil­ity to af­fordd apart­ments in high-end residential projects,” said Yan.

On March 30, the cen­tral bank in­tro­duced a new hous­ing pol­icy aimed at boost­ing the main­land’s gloomy prop­erty mar­ket.

Ac­cord­ing to the pol­icy, in­di­vid­u­als who have al­ready paid off the mort­gage for their first homes can en­joy a down pay­ment ra­tio of as low as 30 per­cent when mak­ing a sec­ond pur­chase.

Those who have not are en­ti­tled to a down-pay­ment ra­tio of at least 40 per­cent.

Since the in­tro­duc­tion of the pol­icy, hous­ing prices in Shen­zhen have seen a dra­matic surge.

Ac­cord­ing to the Na­tional Bureau of Sta­tis­tics, av­er­age price for new homes jumped 7.2 per­cent in June on a monthly ba­sis, the high­est growth among 70 ma­jor and medium-sized main­land cities.

By com­par­i­son, the Guangzhou prop­erty mar­ket seemed less af­fected by the new pol­icy.

Peng Peng, se­nior re­searcher at the Guangzhou Academy of So­cial Sciences, be­lieves the weak pol­icy ef­fect is mainly the re­sult of over­sup­ply and cap­i­tal trans­fer to the then-boom­ing stock mar­ket.

“Prop­erty sup­ply in Guangzhou is rel­a­tively large. Also, the buoy­ant stock mar­ket ear­lier this year spurred some peo­ple to trans­fer their money from the real es­tate in­dus­try to the cap­i­tal mar­ket,” an­a­lyzed Peng. Some other an­a­lyst­san linked the sit­u­a­tion to the city’s com­pet­i­tive edge, say­ing thatth Guangzhou’s rel­a­tively low com­pet­i­tive­nessc has made in­vestorsinves plow their money into other first-tier cities.

Late bloomer

Guangzhou used to be a lead­ing city in South China but has now been over­shad­owed by Shen­zhen. Com­pared with Bei­jing, the coun­try’s po­lit­i­cal, eco­nomic and cul­tural cen­ter, in­ter­na­tional fi­nan­cial hub Shang­hai, and Shen­zhen, which is de­vel­op­ing fast and wields sig­nif­i­cant in­no­va­tive clout, many think Guangzhou is lag­ging be­hind.

The com­pe­ti­tion be­tween Guangzhou and Shen­zhen, in par­tic­u­lar, is at the heart of the dis­cus­sion.

Speak­ing at a press con­fer­ence last month, Guangzhou Mayor Chen Jian­hua said Shen­zhen sets a good ex­am­ple for his city and that Guangzhou will learn from it.

“Guangzhou had once been a lead­ing city in the coun­try’s de­vel­op­ment. But now, it is be­ing out­shone by Shen­zhen and has lost its halo,” Carlby Xie at Col­liers In­ter­na­tional (China) said.

But his over­all at­ti­tude to­ward the city’s prop­erty mar­ket is still pos­i­tive. “Hous­ing prices in Guangzhou are ex­pected to re­main sta­ble, as it has sta­ble de­mand. There are, of course, ar­eas that have room for price growth, but that would take time,”

Xie reck­oned.

Con­tact the writer at sally@chi­nadai­lyhk.com

The wealthy group is rel­a­tively larger in Bei­jing and Shang­hai, com­pared with that in Guangzhou. Those peo­ple have stronger abil­ity to af­ford apart­ments in high-end residential projects.”

Yan Yue­jin, di­rec­tor of re­search at E-House China R&D In­sti­tute in Shang­hai

PRO­VIDED TO CHINA DAILY

The over­all prop­erty mar­ket of Guangzhou ap­pears to be suf­fer­ing the ef­fects of a lower com­pet­i­tive edge, which has seen in­vestors choose to take their money to other first-tier cities with boom­ing real es­tate sec­tors or, as ear­lier this year, to the stock mar­ket.

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