Tag Archives: China Property Prices

Residential prices could plateau in H22010 but major correction unlikely

RENOWNED short-seller Jim Chanos sees a property bubble on the verge of bursting in China. But other well-known investors disagree – and on their side of the fence is CB Richard Ellis president and CEO for Asia Chris Brooke.

Residential prices in China could plateau in the second half of this year but a major correction is unlikely, he said in an interview with BT.

He also believes that large parts of the Singapore and Hong Kong property markets are not in risky territory.

For China, 2010 could be ‘a year of consolidation and stabilisation and getting back to a more sustainable market’, he said. ‘Residential prices could probably increase a little bit in the first half and stabilise in the second half.’

Price growth in China has slowed in the past few months, Mr Brooke said. There is a seasonal effect – buying tends to ebb during the festive period.

Government measures to cool the property market have had an impact, he said. For instance, the China Banking Regulatory Commission told banks last month to raise downpayments and interest rates for third mortgages.

Such initiatives have dampened sentiment. ‘Buyers take a step back and say ‘maybe I’ll wait and see what happens before I make that decision’,’ Mr Brooke said.

The government could implement more measures to calm the market, he said. ‘Policy risk is always there in China. The government has probably more involvement in the market there than anywhere else.

‘But because the real estate sector as a whole is an important part of broader economic growth, I think the government will look to strike a delicate balance.’

Naysayers are worried not just about fervour in China’s residential sector but a potential supply glut in its commercial sector. Reports of buildings left vacant while massive new ones take shape have fuelled more talk of a bubble.

But Mr Brooke is sanguine. It may take several years for supply to be absorbed, but there will be demand from multinational corporations and domestic companies, he said.

For instance, there has been strong demand recently for offices in Beijing, where rent for Grade A space may have bottomed.

As for Hong Kong and Singapore, he sees limited speculation but little policy risk. Recent anti-speculative measures introduced in both markets have signalled that the authorities are keeping a close eye, he said.

In Hong Kong, home prices shot up in the luxury segment but rose at a more measured pace in the mass to mid-market. As such, prices have more room to grow this year in the mid-market than in the luxury segment, Mr Brooke reckons.

Source : Business Times – 4 Mar 2010

Housing prices in China will keep rising next year, helped by a renewed surge in bank lending and stronger inflationary expectations, the government’s top think tank said yesterday.

However, the property market may ebb slightly and stabilise in the second half of 2010 after China moves to tighten monetary policy, said Ni Pengfei, a researcher at the Chinese Academy of Social Sciences (CASS).

‘Our judgement is that property prices will keep rising in 2010, but that there will be some volatility,’ Mr Ni said at a press conference to launch CASS’ annual housing market report.

The traditional rush by banks to lend at the start of the year would be on full display in early 2010, with monetary policy still relatively loose, providing ample cash for property acquisitions, Mr Ni said.

On top of that, rising inflation expectations would prompt Chinese investors to put more of their cash in assets that benefit from rising price levels, with property a prime choice, he added.

Housing prices in China’s 70 biggest cities rose 3.9 per cent in October from a year earlier, the fastest rate of property inflation since September 2008 and confirming a solid rebound from a slump that began late last year.

While China’s long-term urbanisation trend has underpinned the property market, housing affordability remains a concern for many ordinary Chinese. Local media regularly debate whether current prices, at record highs in some markets, are sustainable.

Beijing introduced a range of policies to support the real estate market late last year, from reducing down payments and mortgage rates to making it easier for residents to sell homes.

A burst of bank lending, not government policies, had been the main factor driving the recovery in the real estate market, Mr Ni said.

But he added that Beijing should keep its property stimulus policies in place, fine-tuning them to ensure they benefited ordinary citizens trying to buy homes and not speculators seeking to make a quick profit.

Source : Business Times – 17 Nov 2009