April’s unprecedented price growth for Chinese residential property belies the market-cooling efforts already implemented on the heels of lending excess, and an overly-successful stimulus program. But, with sales volume already dropping, experts predict price declines are on the way as the impact of anti-bubble measures take effect. See the following article from Property Wire for more on this.
Residential property prices in China rose by a record 12.8% in April from a year earlier, defying government measures to stem gains and cool speculation in the real estate market. The latest figures from the National Bureau of Statistics showed the increase topped an 11.7% jump in March that was the highest since the survey of residential and commercial prices in 70 cities started in 2005.
China has already restricted pre-sales by developers, curbed loans for third home purchases and raised banks’ minimum reserve requirements three times this year but none of these measures is affecting the property market at present although analysts believe they will kick in soon.
The government is trying to peel back the effects of a stimulus plan and $1.4 trillion lending binge that revived economic growth but may have now created a real estate bubble.
It may be just a matter of time, according to Brian Jackson, an emerging market strategist at the Royal Bank of Canada in Hong Kong. ‘The latest round of these fine tuning measures were only put in place a few weeks ago, so it is probably too soon to judge their effectiveness,’ he explained.
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But most experts agree that more needs to be done. Developers including Guangzhou R&F Properties and China Overseas Land & Investment have already reported slowing sales in April and analysts believe that prices will start falling in 2010.
Beijing became the first Chinese city to limit residents to purchasing one new home starting this month and more cities are likely to restrict buying, according to Yang Qingli, an analyst at BOCOM International. ‘Prices will definitely drop this year, by between 10 and 20%,’ he predicted.
Prices could fall by more than 30% in the first-tier cities as supply is set to rise, according to Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia. ‘This is the last month this year we see surging prices,’ he confidently predicted.
R&F, the biggest real estate company in the southern city of Guangzhou, said that contracted sales last month slowed because of China’s fiscal tightening. Sales by value at China Overseas fell 9.2% in April from a year earlier, the company said.
Evergrande Real Estate Group, China’s second-biggest developer by sales, said sales fell 10% last month, the biggest decline for six months and it has cut prices by 15% on 40 developments.
‘The new measures will surely kick in soon, but it is likely more restrictions will be announced until Beijing can see clear evidence that prices will drop too, not just transactions volumes, and that can still take a few more months,’ said Andy Mantel, Hong Kong based managing director at Pacific Sun Investment Management.
But if developers need funds all they do is seek less tight credit terms offshore, it is claimed.
China Overseas Land & Investment agreed to an HK$8 billion loan in February that pays 1.45% at current market levels. ‘For property developers to keep growing in what is an extremely fragmented and competitive market, they have to go offshore for funds. It’s one way to circumvent tight onshore credit,’ explained Brayan Lai, a credit analyst at Credit Agricole CIB in Hong Kong.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.
