Upturn Noted in China’s Housing Market

August 16, 2012 / Russell Legato, Residential Property Analyst

China’s housing market is stabilizing according to an S&P analysts’ report. Until recently reports were that Chinese housing was moving in alarming directions and affecting the economy. Now, latest reports consider credit conditions to be growing stronger.

Upturn Noted in China’s Housing Market

Sales in the real estate market are moving towards a higher level after the second quarter. Expectations are that prices will not fall more than 5 percent in the next two quarters. Due to developers having inventory they want to clear, prices will not grow much stronger.

One real estate expert attributes the improved sales to buyers who think the prices have gone down as much as they are going to. This provides the impetus prospective homeowners need to buy a house. Credit requirements have loosened up to add to the belief it is the time to buy.

In spite of credit conditions improving, the banking regulators are concerned about any risky lending. It is found that developers’ property sales are irregular. Policy changes imposed by the government are not expected. However those imposed on investors could differ from owner-occupiers’ policies.

Commercial market properties are more stable than the residential sector. Reported rents in Shanghai and Beijing have returned to 2008 levels above their highest. China expects to see the larger developers take over a bigger portion of that market.

As for home purchases, the restrictions are predicted to remain into 2013. First time buyers will have funding and mortgage rates made more accessible. The government is unlikely to tighten the property market. It would be too risky to the general economy.

Experts claim there are two facets to the property market in China. One is in the largest of the well-developed cities. Only the very wealthy can afford to buy a home or other property there. The other is the majority of cities where prices are more affordable than they have been in a number of years.

Now there are two problems confronting government and it does not know which problem is larger. In the affordable cities, construction activity is down. On the other hand, they need to slow speculation on properties in the largest cities. Since construction counts for 15 percent of China’s economy, the less activity there is, the more damage it has on overall economic growth.

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