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Up or Down? (July 2019)
22/08/2019
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Image: BWPI

urbanisationnews
Home prices in 70 major Chinese cities continued to stabilize despite a slight MoM increase in July, according to the data released by the bureau of statistics. As for cities, 60 of 70 cities reported price gains in July, down from 63 and 67 in June and May, and prices in 7 cities remained at the same level as last month.
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Market Trend

Sales Prices

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The weighted average of new home prices in 70 cities increased 9.7 percent year on year in July, down from 10.3 percent in June according to the calculation done by Thomson Reuters.
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The average price of new homes in 70 cities grew at 0.59% MoM in July which is also the second low in a year. The growth rate in June was 0.66% and prices grew by 0.71% in May. For city classification, tier 2 and tier 3 cities increased 0.7%, compared to 0.3% in tier 1 cities. Among the 4 biggest cities, Beijing and Guangzhou recorded increases at 0.6% and 0.3% respectively, while the price in Shenzhen remained at the same level and Shanghai reported a 0.1% decrease.
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The price level of the second-hand market has also stabilised, the average price of 70 cities saw a 0.37% growth MoM, just a bit higher than 0.28% in the previous month. 48 cities reported price gains in July, up from 45 cities in June.

Sales Condition

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The sales condition also shows a similar smooth tend as the sales of residential buildings by floor area decreased 0.4 percent YoY in January - July, while the annual growth of the sales volume of residential buildings sold was increased by 9.2 percent YoY for the same period. Both of the figures are at a relatively low level in 3 years. 

Policy & Market Analysis

The real estate market has gradually cooled in recent months coupled with the uncertainties of the slowing economy. While during the Politburo meeting in July, the central government has reemphasized that the property market will not be used as a short term stimulus to the economy. That has sent clear signals to the investors who are waiting to see the easing curbs on property markets to boost construction and investment, which will not happen.
With the unchanged government tone and the trend of a stabilised market, the financial regulation bodies have also increased their attention to the property market. The Central Bank recently stressed that they will strictly prohibit consumer loans from being used for purchasing houses in violation of regulation, and strengthened the management of funds flowing into real estate through bank financing, entrusted loans, and other channels. Similarly, China Banking and Insurance Regulatory Commission (CBIRC) has ordered 32 cities where the markets were previously overheated to closely examine their loan business into the property sector, including the loans to developers or projects, as well as mortgages to individuals. Direct financing to developers who had not secured all necessary approvals or funding they need, will be strictly banned
Amid the challenging environment of the property markets, developers are now feeling more pressure. The development giants Country Garden and China Evergrande reported 32 percent and 13 percent drops in sales in July, according to the report from SCMP. Developers also tend to be cautious and rational in purchasing lands, as Vanke and Sunac have announced that they have no firm plans or targets to purchase land this year and will be avoiding acquiring land in the 3rd and 4th tier cities. 

Year on Year Summary

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Image: BWPI
​I. Sales Prices of Newly Constructed Residential Buildings (excluding affordable housing).

Year-on-Year price changes:
  • Increased in all 70 cities (top 5 cities are Xi'an 25.3%,Dali 22.7%, Hohhot 20.3%, , Qinhuangdao 20.1%, Guiyang 19.4%.)
  • No city remained at the same level.
  • No city reported price declines
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​​II. Sales Prices of Second-Hand Residential Buildings.
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​Year-on-Year price changes:
  • Increased in 67 cities (top 5 cities are Hohhot 21.7%, Dali 18.3%, Xining 14.5%, Jining 13.5%, Nanning 13.4%.)
  • No city remained at the same level.
  • Decreased in 3 cities (Beijing 0.5%, Zhengzhou 0.6%, Guangzhou 1.4%)  

Historical Land Auction in Shenzhen

As the largest residential land supply of Shenzhen over the past 20 years, a land auction held in June this year attracted more than 80 developers to join the bidding event to place bids on 5 plots, including the development giants such as Vanke, Poly Development, China Overseas Land & Investment, China Resources Land and China Merchants Shekou.
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The 5 plots are located in relatively remote areas, image: Baidu Map
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Plot A122-0360
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Plot A510-0151
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Plot
​A510-0152
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Plot A817-0609
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Plot
G12107-8063
Satellite images of the 5 land parcels provide more information about the surroundings. Image: Shenzhen Land & Real Estate Exchange Center ( sz68.com)
Many of them have shown a strong interest in acquiring the large land plots provided by the government with a combined area of 170,273 square meters, and 5 of the winners paid the premium prices which are 45 percent above the minimum bids. 
It is noteworthy that Shenzhen has been facing a serious shortage of residential land supply for a long time, and the lands provided by the government were not sufficient in recent years. For example, the government only released 2 residential plots in 2017 and 13 parcels of residential land in 2018 with 6 being sold to government-affiliated talents housing company for building only for talent homes. 
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The land to land to asset ratio of the 5 parcels have already reached a level above 80 percent. Image: CRIC
The five plots the developers competed with are located in four districts of Bao'an, Longhua, Guangming, Pingshan, with a total winning bid of 22.37 billion yuan. Logan Property Holding bought the 32,667 square meters plot in Longhua District for the most expensive price of 6.6 billion yuan, while China Overseas Land & Investment paid 5.4 billion yuan for the largest parcel of in Guangming District. Guangzhou's Yuexie Property Company and Ping AN Group's venture capital arm acquired the lands in Bao'an and Pingshan District, and Power China Real Estate Group won the smallest parcel in Guangming District for 2 billion yuan
Home prices in Shenzhen tend to be higher in the long run in considering a continuously growing population driven by the expectation of the Greater Bay Area and limited land supply. As a result, after the intense competition, the costs measured by the floor price of the acquired parcels have already reached the similar prices of second-hand homes in the neighbourhoods. Therefore, many suggested that wheat flour is more expensive than the bread, and companies who paid the prices for the lands seem willing to take the risk for the future while others may not.   

Changes in Publishing Housing Prices in Shenzhen 

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Shenzhen Real Estate Information Platform provide day to day information of about new home and second hand home transactions in the city. Image: Shenzhen Real Estate Information Platform
The Housing and Construction Bureau of Shenzhen has decided to stop publishing the average home prices of the city on its platform (zjj.sz.gov.cn:8004). As the only government data releasing platform, Shenzhen Real Estate Information Platform had been publishing the average prices of newly built and second-hand homes, transaction amount, and other relevant data of the real estate market.
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The sales transactions in July were concluded in non-prime districts, particularly Bao'an, Longgang and Pingshan districts, and most of them were driven by rigid demand.
There is a clear intention to stop publishing the price data, according to the Bureau due to the limited size of real estate market in Shenzhen, the level of the transaction price level is easily affected by structural factors, directly publishing relevant price information does not reflect the real situation of the market.
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In Shenzhen, small homes with a size of less than 90 square meters account for the biggest portion of those sold in July.
Therefore, with fluctuated amounts of supply over periods, and the price difference in different types of housing, the discussing of average housing prices may be pointless and may cause improper market behaviour and expectation.


​Read the original article at stats.gov
2019/05/23
Up or Down? (April 2019)

2019/02/22 
Up or Down? (January 2019)

​​2018/11/28
Up or Down? (October 2018)
​

​2018/8/31
Up or Down? (July 2018)

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