Participants at the Bo'ao Real Estate Forum, held on 8 August 2017, agreed that measures taken in H1 2017 to curb overly rapid growth of house prices and stabilise the market have yielded initial fruits, reports Economic Information Daily.
In H1 2017, the number of housing transactions in first- and second-tier cities fell, bringing down house prices, says Gu Yunchang 顾云昌 Ministry of Housing and Urban-Rural Development (MoHURD) policy expert committee member; transactions and prices are growing at a slower rate in the third- and fourth-tier cities.
China's housing market is subject to a three-year cycle, notes Gu. Since the market peaked in terms of transactions last year, it is likely to adjust downwards this year, he adds. The forum attributed the cooling housing market to the state's firm stance that housing should be for living, not for speculating, and to differentiated policy interventions between overheated markets and others.
The housing market shows further segmentation. Housing transactions in first- and second-tier cities have declined by 20 percent. Third- and fourth-tier cities around hot-spot cities are cooling down, while those further away have been picking up since last May, says Ouyang Jie 欧阳捷 Future Land vice president, a developer of high-end commercial real estate. This is due to the resettling of migrant workers back in their hometowns, he says.
Real estate developers are facing more intense competition, thinner profits, and industrial reshuffling under the current policy movement. Zhu Zhongyi 朱中一 China Real Estate Association former chair argues they are also up against
- tight control over credit entering the housing market, and greater difficulty in securing land for development
- both undermine two crucial factors in developers' traditional profit model: cheap credit and land
- growing rental housing market as a percentage of the total market, which will negatively impact their sales
- further segmentation of the housing market, which requires them to stay agile
- green development and construction industrialisation, which will require them to deal in interior decoration, instead of leaving this to home buyers
These challenges will push developers to change their business models and strategies.
The average total liabilities to total assets for listed real estate developers stood at 0.78, notes Lin Caiyi 林采宜 Guotai Junan Securities chief economist, suggesting that the real estate industry has essentially hijacked the financial sector. This creates a policy tradeoff between curbing housing bubbles and reining in banks' nonperforming assets.