There’s still room for moderate growth
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