China Property Market: Low Supply and High Demand Drive Home Sales

China Property Market Overview

Chinese developers are speeding up project launches, sensing a turning point in sentiment among homebuyers, after several rounds of policy support from the central government helped fuel demand and temper a slide in property prices. Some 115 projects offering a total of 44,577 homes were approved for presale in the November 3 week, according to data compiled by 58 Anjuke Real Estate Research Institute, which tracks activity in 55 mainland cities, 30 per cent more than in the preceding week.

Sales Performance and Economic Impact

The nation’s top 100 developers sold 435.5 billion yuan (US$60.2 billion) worth of homes in October, 73 per cent more than in September, according to China Real Estate Information Corp. Home prices fell 0.5 per cent over the same period, the smallest drop since March, government data showed. “There is great enthusiasm,” said Wei Kai, a marketing director at Centaline Property’s Shenzhen branch. “Sentiment is improving, so everyone is keen to launch their projects as soon as possible.”

Government Policies Driving Demand

The central government followed up on its September stimulus blitz by amending the deed tax structure on December 1. It will lower the cost of ownership and widen the access to bigger homes for more people. China will amend taxes on residential transactions to lower the cost of ownership and motivate a larger pool of buyers. In Shanghai, at least five projects are being fast-tracked for sales from their initial plans, according to You Liangzhou, the owner of Baonuo, a property agency in the nation’s main financial hub.

Challenges Ahead

The newfound exuberance among homebuyers may not last. China’s economy is still challenged by weaker income growth and confidence in many debt-laden developers. “Homebuyer sentiment continues to be impaired by a slowdown in economic and income growth and lingering concerns about project incompletion,” global rating firm Moody’s Ratings said in a report on November 11.

Market Forecast

October’s strong sales performance has helped shrink the outstanding stock of new homes, according to China Real Estate Information Corporation. Some 6.2 million square meters are expected to become available in November, a decline of 9 per cent from October and 52 per cent from a year earlier. Supply in four tier-1 cities of Beijing, Shanghai, Guangzhou and Shenzhen is forecast to drop by 25 per cent and 59 per cent, respectively.