It's correction time: China's housing market to slow down ---The current correction in the country's housing market, characterized by shrinking sales and decreasing prices, is likely to continue for at least one year, a latest industry report released by Shanghai Shenyin Wanguo Research & Consulting Co predicted.
"The correction has just started,'' Yin Zi, an industry analyst with SYWG Research & Consulting, said in the report released yesterday.
The inventory of residential houses, however, will continue to rise across the country – at least through 2009 – as projects were planned during the previous market boom. "A drop in the inventory/sales ratio, usually a signal that prices are hitting the bottom, is not likely to be seen by 2010,'' Yin said.
In the meantime, people need to recoup their purchasing power amid price reductions and this is expected to be a rather long and gradual process, Yin said.
The report also forecast that nationally, annual growth in real estate investment will be around 24 percent in 2008. This will drop drastically to 5 percent in 2009.
Analysts say, there will also be a 6 percent drop in the area on which new constructions commence in 2009, after a 5-percent increase this year.
China Vanke Co Ltd, the country's largest publicly-listed real estate developer, said earlier this month it has already adjusted its development plans for the year given the changed market situation.
The company has reduced the area for its new constructions to 3.5 million square meters for the second half of the year. The projects to be completed in this period have also been slashed to 4.29 million square meters.
The one-year correction forecast now seems to be widely adopted among industry experts.
Last month, Guo Guangchang, chairman and chief executive officer of Fosun, China's largest private company with operations in steel, real estate, pharmaceuticals, retail, mining, financial services and strategic investments, told a regional forum that he believed the correction will probably last over the next 12 months.
He, however, remains upbeat about the industry's long-term prospects.
(Shanghai Daily August 27, 2008)
........What is grim ? if you follow all the news and reports, then you can stop trading now and get out from US market. US is bleeding because of their stupidity to leverage loan in the property and derivative markets. People comparing chinese market with the problem in US. Again stupidity.
Chinese government is aiming to tight control on real estate loans and excessive granting of loans and to slowdown the excesive growth in RE/commercial property. Is this grim or stupid from chinese government ? Stupidity belongs to US government. allowing bnks excessive granting of credits, housing market was a big balloon.More than 150 billion write off. Are you going to bet on US financials ? or EJ ?
EJ business is luckily supervised by a chinese government that knows how to manage the risk and excessive growth.
1.3 billion of people and a country that makes y-o-y a GDP growth are the key drivers that brings EJ succesful. I applaud the government involvement as EJ will mature and the volume of business is not based on a balloon, whereby houses are collateralized 100 times to get the finance. One bad experience is enough....
Yes, the news looks grim, however, please keep in mind that the best time to buy stocks of a good company is when no one wants them, if everything is rosy, do you think EJ will be still trading at this price? I guess it all comes down to what is already priced into the stock..
ksn as much I love your articles, monetary policy in china is only one out of many factors forcing prices to decline. Its not a 1:1 to relationship. There are much greater forvces at play here including other controls that the govt. has put in place in the recent past when it comes to real estate. I agree there will be more monetary easing but I dont see that happeing until some time next as right now. Puzzle with moving parts but as of right now I don't see them easing anytime soon.
Real-estate developers pare prices Real-estate developers are offering discounts at more residential projects across Shanghai — even in prime locations — as home buyers tighten the purse strings.
"Price wars already seem inevitable as transaction volume of commodity houses has been low in Shanghai for quite some time amid a prevailing wait-and-see attitude," said Xue Jianxiong, head of research at Shanghai Uwin Real Estate Information Services Co, a major tracker of the city's property data. "Most developers have to follow suit so as to garner cash for survival."
Brilliant City, a super-sized residential project on Zhongtan Road in Putuo District within the city's Inner Ring Road, sold a total of 29 apartments a week ago at an average price of 13,842 yuan (US$2,025) a square meter. That compared to the 21,049 yuan a square meter average during the first six months at the project. Though industry insiders said low-level units were all sold to company staff, the price gap is still significant.
A high-end residential project in downtown Jing'an District, which was asking prices of between 41,800 yuan and 44,000 yuan a square meter for a new batch of apartments last month, has recently been selling them at an average price of 33,575 yuan a square meter.
"The market has been tough and even developments with prime locations, previously regarded as the most risk-free, have been affected," Xue said.
Sanlin area in Pudong is another major battlefield for real-estate developers. China Vanke Co and Gemdale Corp, two of the country's leading property companies, recently launched big price cuts at their projects there which sit about a kilometer away from each other.
The two firms both introduced cash rebates of as much as 100,000 yuan per unit in an effort to lure home buyers.
Huang Hetao, an analyst at Century 21 research center, said the fact that housing prices soared too rapidly in the area during the market boom as compared to the average growth rate elsewhere in the city might be another major reason behind such price slashes.
According to latest statistics gathered by Uwin, the average price of new homes in Beicai in Pudong, Wanli in Putuo and Dahua in Baoshan all retreated to below 14,000 yuan a square meter from more than 16,000 yuan a square meter.
"Under the current environment, developers offering discounts first will likely benefit the most," said Cai Weiming, a renowned industry veteran. "Companies which don't follow steps for fear of losses might find it hard to survive and will probably lose more later."
Quick money has become the top priority for many of the country's real-estate developers, as the falling trend has been nationwide. For big companies, which usually run many projects at one time, cash flow would be critical, industry insiders said.
Some of the country's major real-estate developers are suffering a dip in sales.
China Vanke, the country's largest publicly listed real-estate developer and also the biggest residential developer, reported earlier this month it sold a total of 360,000 square meters of property in July, down 27 percent from a year earlier. Sales, meanwhile, fell 15 percent to 3.11 billion yuan.
And Gemdale, the Chinese developer partnered with ING Groep NV, also saw drops of 31.8 percent and 25.8 percent last month in areas sold and sales, as compared to a month earlier.
The National Bureau of Statistics said sales of new housing fell 1.1 percent in the first six months of this year across the country and areas sold dropped 6.9 percent from the same period a year earlier.
(Shanghai Daily August 26, 2008)