Property sector, farewell to 'golden era'

After years of breath-taking expansion, China's property sector is finally cooling down. However, buying a house is still an unaffordable option for Lyu Haoran, a post-1990 graduate in the western city of Lanzhou.

Lyu, 24, grew up during China's most prosperous decade. He now faces a housing market where ballooning prices make it harder for young people to buy a home.

The property sector has been an important driver of growth in the world's second-largest economy for most of the past decade, as housing prices soared and construction of new apartments mushroomed across the country.

"I cannot afford one now. I don't want to sacrifice the quality of my life just to afford an apartment, even if I have sufficient savings to pay the down payment," Lyu said. "Home-ownership is not my top priority and it seems not so important for our generation as it used to be for our parents."

A recent study by the Chinese Academy of Social Sciences (CASS) confirmed the change in the mind-set of young Chinese, most of those born in the 1990s like Lyu.

While most respondents of the CASS' survey still hope to buy their own apartments, fewer of them are willing to compromise on their lifestyles and spending habits in order to afford a home. It's a far cry from the obsession with buying property often held by older generations.

The shifting social attitudes about home-ownership came with a property market downturn. Yu Liang, president of China Vanke, the nation's biggest residential developer, said the slowdown heralded the end of the "golden era" in which "everyone makes money out of property."

After climbing at double-digit rates through most of last year, housing prices in China started to cool in late 2013. The downturn continued in 2014 and spread to most major cities.

The latest monthly data show new home prices fell in 67 out of 70 cities monitored by the government in November. Meanwhile, 68 cities saw prices drop from the levels a year before.

Property investment, which affects more than 40 other industries, also cooled, fueling concern about economic slowdown.

China International Capital Corporation (CICC) estimated the property sector could reduce the country's 2014 GDP growth by as much as a one percent, the largest source of economic slowing this year. The sector is also expected to drag down China's 2015 GDP growth by 0.3 percentage point, the CICC forecast.

To avoid a sharp slowdown in the sector, the Chinese government has unveiled a series of measures, including fewer restrictions on home purchases and eased mortgage rules. In addition, the central bank last month cut benchmark interest rates for the first time in more than two years to cut financing costs.

However, cooling demand, minimum earnings on property investment and serious oversupply are compromising the government's efforts, said Ni Pengfei, director of CASS center for city and competitiveness.

A report released by the CASS expected housing prices to continue to fall in the coming year but said a collapse was unlikely as the country's urbanization drive would continue to shore up demand and economic outlook remains sound.

The report foresaw an average five percent drop in housing prices across the country in 2015 and annual sales were expected to fall by 12 percent in terms of space floor areas.

In the long run, Ni said, the property sector would follow an L-shaped development pattern, which means slowdown in the sector would gradually bottom out and remain there for a long time.