Sales, investment set to drop in 2017: report
Sales of China's residential housing will drop this year, along with a deceleration of property development investment, while consolidation among developers will intensify, according to a report released Tuesday by the Chinese Academy of Social Sciences (CASS).
The total area of housing that will be sold in 2017 is expected to contract by 5-10 percent, based on prediction models and evaluation of medium- and long-term housing demand, said the report. Meanwhile, there will also be a slowdown in the growth of investment in property development.
The report said that the country's property market will see a mild slowdown, with market adjustment becoming the focus in first- and second-tier cities. Deleveraging will be the main task for the sector in second-tier cities, while favorable policies for cutting excess inventories in third- and fourth-tier cities will remain, it noted.
The national housing sales area reached 290 million square meters in the first quarter this year, up 19.5 percent year-on-year, but the growth rate dropped by 5.6 percentage points compared with the first two months of the year, data from the National Bureau of Statistics showed in April.
On a national level, the growth rate of transactions and prices will both contract in 2017, but it's hard to say how much the figures will drop because of the influence of real estate transactions in third-tier cities, said Yan Yuejin, research director at Shanghai-based E-house China R&D Institute.
Home transactions in third-tier cities may remain at a high level, and prices may continue to rise, especially in cities that will not roll out housing purchase limit regulations, Yan told the Global Times on Tuesday.
Tightening policies
Since March 17, the country has come up with another round of housing purchase controls in various cities to maintain the stability of the property sector, including raising loan rates, housing purchase lotteries and regulating developers and agencies' operations.
On Tuesday, Southwest China's Chongqing Municipality announced it would give priority to housing provident fund loans for workers' families for their first home, while suspending housing provident fund loan applications for second homes in the city's main urban area, according to a statement from the Chongqing Municipal Housing Provident Fund Administration Center.
On the same day, Wuhu in East China's Anhui Province rolled out a slew of measures to regulate the property market, such as preventing residential houses from being sold before getting a property certificate for two years, according to an announcement on the local government website.
With the rollout of more housing purchase controls, local markets may freeze periodically, according to Hui Jianqiang, research director with real estate information provider Beijing Zhongfangyanxie Technology Service. The authorities may still keep in place targeted policies to stabilize the domestic real estate sector this year, he said.
In 2016, overall national investment in property development reached a record high of 10 trillion yuan ($1.45 trillion), up 6.9 percent year-on-year. In the same year, the national housing sales area soared by 22.5 percent to 1.57 billion square meters, data from the report showed.
Fierce competition
Competition among domestic property developers will be fierce, due to factors including the rising cost of acquiring land, according to the CASS report.
The authorities have tightened controls on capital flowing into property developers, domestic newspaper China Times reported last Friday.
For example, in October 2016 it was forbidden for commercial banks' wealth management products to be loaned to property developers, and developers' bond issuance is also under strict regulation, it said, citing industry insiders.
Domestic developers' focus on first- and second-tier cities has increased competition for land, pushing up prices and squeezing profit margins as price growth for residential properties slows in many cities, Moody's Investors Service said in a recent report.
Besides, domestic developers will face sales pressure, especially those that mainly focus on big cities, which may facilitate industry consolidation, Yan noted.
The number of China's property developers is estimated at around 60,000 to 70,000, which is too many and may lead to risks in small developers, Hui noted. "Big developers with strong risk control capacity and sound management may stand out and see better development, while smaller ones may struggle," Hui said.
Data from Moody's showed on Monday that sales for China's big developers such as Country Garden, China Vanke Co and China Evergrande Group still grew more than 250 percent year-on-year in the first quarter, despite the tightening policies.
