Up or Down? A Review of the China Housing Market 2014 - Q3

barry says

It appears that the Chinese property environment is becoming ever more complicated with central government recently releasing new intervention policies to re-stimulate the sagging market. It’s only been 18 months since they intervened to hold back sales but now prices across the country are consistently falling to 2013 levels. On the eve of Chinese October National Holiday, The Central Bank of China and The China Banking Regulatory Commission jointly made an announcement that mortgage rates and down payment levels were to be cut for property purchasers. It is one of the biggest moves this year to boost an economy increasingly threatened by a sagging property market. 

Second-house buyers can now obtain a 30% discount on their mortgage rates if they have fully repaid their previous mortgage loans, a privilege previously limited only to first-house buyers. Mortgage rate can be as low as 70% of the Benchmarking interest rate. [1] [2]

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The overall outlook within the media is positive. Xian Evening News analysed that property purchasing restrictions have recently been loosened in most of cities, but it will still take some time for the market to heat up. Two reasons are outlined for this. Firstly, the demand in the property market is not as strong as in previous years since a large number of those with consuming ability and demand have already purchased their homes. Secondly, investing in property is not seen as being as profitable as previously whilst still requiring high entry capital. [3]

House prices are generally now declining on a month on month basis whilst still continuing to show a rise year on year, however at an ever decreasing increment. An increasing number of cities are now demonstrating year on year drops in prices.

National Bureau of Statistics of the People's Republic of China based on 70 large and medium-sized cities . [4; 5; 6; 7]

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Two hundred and two mainstream real estate enterprises had released their semi-annual reports by mid September. Some suggest that Chinese property prices are still not high in global terms, leaving significant space for future growth. 

According to Lande Consultancy Company’s statistics, the total revenue of real estate companies is around 716.8 billion yuan, increasing 18.5% year on year, whilst net profits are 102 billion yuan, increasing 0.99% year on year. The market has started to recover since the fourth quarter of 2012 with house prices skyrocketing since the first half of 2013; seen as the best season of the property industry. However it is quite surprising to see the sales volume and net profit rising in 2014. [8]

The average new residential sales prices of 100 cities from June to August fell from 10,923 yuan/sqm to 10,771 yuan/sqm,. [9; 10; 11;12] 

The latest report shows that the average new residential sales price of 100 cities in September is 10,672 yuan/sqm, decreasing 0.92% month on month which is the fifth consecutive month of decline since May.

China Index Academy releases a report based on the residential price index of 100 cities in China

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Since the release of the new mortgage policy the housing market has been restless. Some mainstream banks have expressed their willingness to support the new mortgage policy, however most of banks are not able to offer 30% discounts on mortgage rates due to financial pressures. For example, Shenzhen branch of China Construction Bank stated that they can offer only 3% discount for mortgage rates to first-house buyers and those who have paid off their first loan can enjoy the same mortgage policy when they buy a second house. Shenzhen branch of China Merchants Bank said that the benchmark interest rate of buying the first house remains the same, but it is possible to apply for a 5% discount if the house purchaser can deposit the first year’s mortgage repayments in advance. [13]

The government appears to be making further efforts to regulate and control the property market. On October 9th, The Ministry of Housing and Urban-Rural Development Construction, Ministry of Finance and The Central Bank of China jointly announced a notice on Personal Housing Accumulation Fund Loan. Applications for the Loan can be made as long as monthly payments have been made into the Personal Housing Accumulation Fund for at least 6 months. [14]

The Personal Housing Accumulation Fund is deducted from an employee's monthly salary within a ratio of 8 to 12%. It is exclusively for the purchase of residential houses and is paid off and returned to workers in one lump sum when they leave the office or retire. [15]

Personal Housing Provident Fund Loan is a home loan, for which a borrower who pays into the fund may apply to purchase, construct or renovate their home providing they are able to offer security. [16]

Traditionally September and October are the peak months for property sales in China. Following on from these recent government incentives the market is watching attentively to see if the falling sales trend will be reversed. 

Related Article: 


Up or Down? A Review of Current Housing Market In China

References:

[11http://szdaily.sznews.com/html/2014-10/01/content_3022016.htm
[2] http://www.sznews.com/banking/content/2014-10/03/content_10298020.htm
[3] http://news.hz.fang.com/2014-09-25/13840729.htm
[4] http://www.stats.gov.cn/tjsj/sjjd/201406/t20140618_569658.html
[5] http://www.stats.gov.cn/tjsj/sjjd/201407/t20140718_583496.html
[6] http://www.stats.gov.cn/tjsj/sjjd/201408/t20140818_597390.html
[7] http://www.stats.gov.cn/tjsj/sjjd/201409/t20140918_611674.html
[8] http://news.hz.fang.com/2014-09-28/13864851.htm
[9] http://fdc.fang.com/news/2014-09-30/13884945.html 
[10] http://news.zaozhuang.fang.com/2014-09-01/13664307.htm
[11] http://news.cq.fang.com/2014-08-01/13420139.htm
[12] http://news.yueyang.fang.com/2014-07-01/13160822.htm
[13] http://sz.house.ifeng.com/detail/2014_10_11/50058570_0.shtml
[14] http://sz.house.ifeng.com/detail/2014_10_14/50064622_0.shtml
[15] http://www.chinadaily.com.cn/business/2008-05/09/content_6674182.htm
[16] http://www.boc.cn/en/pbservice/pb2/200806/t20080626_1324012.html