There’s still room for mod­er­ate growth

China Daily (Hong Kong) - - BUSINESS - By WU YIYAO in Shang­hai wuyiyao@chi­nadaily.com.cn

To buy or not to buy — that’s the ques­tion for Hu Chen­gru, 39, a prospec­tive home­buyer in Shang­hai.

Hu had re­al­ized some 3.6 mil­lion yuan ($529,000) from the sale of her old apart­ment ear­lier this year. Now, she would like to buy a more spa­cious flat for “up­grad­ing” the qual­ity of her life. But she is still wait­ing for the right time to buy.

“Ev­ery day, I ask who­ever I think may have some knowl­edge about the real es­tate mar­ket: ‘ Will the home prices drop in Shang­hai?’

“Their an­swers have ranged from ‘Def­i­nitely not’ two months ago to the cur­rently ‘ Per­haps’. But af­ter meet­ing so many home­buy­ers, agents and read­ing so many ar­ti­cles, I’ve reached my own con­clu­sion. The prices won’t rise as quickly as they used to be, but they are not likely to drop ei­ther, be­cause there are so many peo­ple like me want­ing to buy a home. The de­mand is so huge,” said Hu.

In key cities like Bei­jing and Shang­hai, home prices are less likely to drop sig­nif­i­cantly, but the pace of rise has slowed, said an­a­lysts.

“One ma­jor rea­son be­hind the lit­tle chance of a sharp fall in home price in key cities is the great de­mand as re­flected by de­mo­graphic data. Some 70 mil­lion res­i­dents are en­ter­ing the age of get­ting mar­ried, hav­ing chil­dren or hav­ing a sec­ond child, and ur­ban­iza­tion-re­lated mi­grants also need hous­ing in cities. Without new de­vel­op­ments, some cities may ex­haust their cur­rent in­ven­to­ries in just nine months. Sup­ply of land is lim­ited. Con­sid­er­ing all these fac­tors, home prices in key cities are not likely to drop sig- nif­i­cantly,” said Liu Li­gang, econ­o­mist with Citibank China.

The av­er­age price of apart­ments may not drop sig­nif­i­cantly but trans­ac­tion vol­umes may shrink up to 40 per­cent in the first half of 2017, in im­me­di­ate re­sponse to mea­sures against spec­u­la­tive buy­ing, said Zhang Yu, an­a­lyst with CICC Ltd.

“In first- and sec­ond-tier cities, de­mand from spec­u­la­tive buy­ers has been curbed af­ter pol­icy tight­en­ing, so trans­ac­tion vol­umes will shrink, but the av­er­age price won’t de­cline be­cause land prices are high, and de­mand is still solid and in­creas­ing while sup­ply is short,” said Zhang in a re­search note.

In third- and lower-tier cities, par­tic­u­larly those neigh­bor­ing key cities, prices may rise slightly around 10 per­cent, which would be nat­u­ral and ra­tional, said Zhang.

A re­search note from Guo­tai Ju­nan Se­cu­ri­ties cited fi­nanc­ing con­di­tions as a fac­tor for sta­ble growth of the real es­tate sec­tor.

The note fur­ther said mone­tary poli­cies have not been very tight­ened, which gives the real es­tate sec­tor a spa­cious room to grow. Also, as a pil­lar of eco­nomic growth, real es­tate is not likely to face sig­nif­i­cant down­ward pres­sure if the over­all eco­nomic growth is pos­i­tive.

Econ­o­mists said that un­cer­tainty re­mains, in­clud­ing changes to poli­cies, the pace of ur­ban­iza­tion and in­vest­ment growth. Mar­ket cor­rec­tions, if any, would be mild.

Wang Tao, econ­o­mist with UBS Se­cu­ri­ties, said pol­i­cy­mak­ers would not like to see sig­nif­i­cant de­cline in the real es­tate mar­ket be­cause that would im­pact over­all eco­nomic growth.

“Poli­cies have al­ready been in­tro­duced to ad­just and con­trol the real es­tate mar­ket. They are mild and are cus­tom­ized for each city. In­ven­to­ries

to sit and wait,” said David Ley, a Van­cou­ver-based pro­fes­sor at the Univer­sity of Bri­tish Columbia’s De­part­ment of Ge­og­ra­phy, who fo­cuses on hous­ing. “In­vestors are go­ing to find an­other city,” and Toronto and Seat­tle are the top two con­tenders, he said.

While there are no fig­ures specif­i­cally show­ing pur­chases made by off­shore buy­ers, bro­kers say de­mand in Seat­tle and Toronto has been ro­bust, par­tic­u­larly for the high-end prop­er­ties Chi­nese in­vestors tend to fa­vor.

In Seat­tle, about 12 per­cent of all homes this year sold for at least $1 mil­lion, dou­ble the share over the past decade, ac­cord­ing to bro­ker­age Win­der­mere Real Es­tate. Sin­gle­fam­ily home prices in King County, where the city is lo­cated, jumped by al­most 15 per­cent in Oc­to­ber from a year ear­lier, data from the lo­cal re­al­tors as­so­ci­a­tion show.

The av­er­age price of a Toronto home rose by 23 per­cent in Novem­ber from a year ear­lier, while sales soared by al­most 17 per­cent, the lo­cal real es­tate board re­ported on Dec 2. In Van­cou­ver, mean­while, sales have plunged since July and were down by 37 per­cent last month com­pared with the year be­fore.

About half of the homes sold in Seat­tle’s sub­urbs are go­ing to Chi­nese buy­ers, with many of the trans­ac­tions re­quir­ing the use of in­ter­preters, in­ter- na­tional banks and mul­ti­ple es­crow de­posits, ac­cord­ing to Dean Jones, chief ex­ec­u­tive of­fi­cer of Realog­ics Sotheby’s International Realty. This is up from about 30 per­cent last year, he said.

“This is Van­cou­ver 2.0,” said Jones, who lived in the Cana­dian city about two decades ago, when the cap­i­tal flow from Asia started to ac­cel­er­ate. “A lot of the same mo­ti­va­tions and goals are be­ing repli­cated in Seat­tle.”

The Seat­tle metropoli­tan area has seen a 50 per­cent jump in house prices in the past five years, thanks in part to a boom­ing tech­nol­ogy in­dus­try and growth in com­pa­nies such as Ama­zon.com Inc and Mi­crosoft Corp. Still, the me­dian home value is $409,900, less than in San Fran­cisco and Los An­ge­les, ac­cord­ing to Zil­low Group Inc. In Van­cou­ver, the bench­mark home price is C$919,300 ($680,000), or C$1.06 mil­lion with the tax.

“Most of my Chi­nese in­vestors, 60 to 70 per­cent, com­pare Van­cou­ver and Seat­tle,” said Car­rie Brown, a bro­ker at Ewing & Clark Inc at Seat­tle.

growth rate of home price in Toronto in Novem­ber

QIU DAOCHEN / FOR CHINA DAILY

Prospec­tive home­buy­ers at a realty expo in Shang­hai check the fine-print of a mar­ket­ing brochure for a mod­ern hous­ing es­tate.

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