New-home prices poised to soar over next few decades

China Daily (USA) - - BUSINESS - By ZHAO YANRONG zhaoy­an­rong @chi­nadaily.com.cn

The price of a newhome in China will nearly quin­tu­ple in three decades de­spite sharp drops in trans­ac­tion vol­umes, ac­cord­ing to a re­cent re­port re­leased by China In­ter­na­tional Cap­i­tal Cor­po­ra­tion Ltd.

By 2050, the av­er­age price of new houses in China will break 30,000 yuan ($4,500) per square me­ter, and prices in cities such as Bei­jing, Shanghai, Guangzhou and Shen­zhen will rise up to 70,298 yuan, al­though the av­er­age price in­2015wa­sonly 6,472 yuan and 21,505 yuan, re­spec­tively, the re­port said.

The trans­ac­tion vol­ume will wit­ness sig­nif­i­cant changes, the re­port said. The trade vol­ume na­tion­wide will cut by nearly half from 1.12 bil­lion sqmin2015 to 671 mil­lion sqmin 2050. In first­tier cities, the vol­ume will reach a peak of 58.7 mil­lion sqmin2025, and then shrink to 40.6 mil­lion in 2050.

The fig­ures were cal­cu­lated based on the economic fund­men­tals of the prop­erty mar­ket in China, said Zhang Yu, an an­a­lyst at CICC.

Ac­cord­ing to Zhang, the price and trans­ac­tion vol­ume, in the short term, might be af­fected by el­e­ments such as money sup­ply, govern­ment poli­cies, ur­ban­iza­tion and the de­vel­op­ment of in­fra­struc­ture. How­ever, in the long term, macro­eco­nomics and pop­u­la­tion are the two de­ci­sive fac­tors in Zhang Yu, the prop­erty mar­ket.

“When­thep­er­cap­i­taGDPis at a lower level, hous­ing is not peo­ple’s ba­sic re­quire­ments. But when GDP grows to a cer­tain level when their re­quire­ments for hous­ing can be gen­er­ally sat­is­fied, the trans­ac­tion vol­ume would go down,” Zhang added.

Com­pared with sec­ond­hand prop­erty, which is a much­more com­pet­i­tive mar­ket, the price of new­houses is of­ten de­ter­mined by the prices of land, which is strongly in­flu­enced by govern­ment de­ci­sions, the an­a­lyst said.

In na­tion­wide prop­erty pur­chases, 20 per­cent are sec­ond­hand houses and 80 per­cent are new ones. So far, trans­ac­tions of sec­ond­hand houses have only sur­passed new ones in 10 cities, in­clud­ing four first-tier cities and six lead­ing sec­ond-tier cities, Zhang added.

“In the fu­ture, when the new and sec­ond­hand house buy­ing ra­tio reaches six to four, the real es­tate in­dus­try in China will be more mar­ket-driven and much closer to the economic laws and our cal­cu­lated fig­ures,” he said.

For home­buy­ers who have rigid de­mand, any short­term hous­ing value de­pre­ci­a­tion will only be a “pa­per loss”, said the an­a­lyst, be­cause in the long term, the prop­erty prices in China will def­i­nitely in­crease due to the in­evitable in­fla­tion.

“House pur­chas­ing is con­sumer­spend­ing in na­ture, but most home­buy­ers in China more or less con­sider it as an in­vest­ment. For the prop­erty buy­ers, who can af­ford the price and with a lower lever­age, to­day’s price is the best value to pur­chase,” he added.

For the prop­erty buy­ers, who can af­ford the price and with a lower lever­age, to­day’s price is the best value to pur­chase.” an an­a­lyst at CICC

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