Real estate is currently the leading factor of China economic growth.
Real Estate had been growing strongly for many years due to rapid economic growth, but the Government established new regulations last year aimed at slowing down the market. Since then demand and prices have both decreased in a large way. Here are a few of the most recent statistics to gauge the Chinese real estate market’s next move.
The total supply of land in China that is intended for real estate development has decreased by 15 percent in the first half of 2012. On the other hand, the average cost for residential plots increases by 1.8 percent annually, according the China’s Ministry of Land and Resources.
From January to June 2012, the ministry has released 597 million square meters of land for property development, which accounts for 22 percent of China’s total land supply. As for the pricing, land plots that are designated for residential homes are sold at about 4,522 yuan for each square meter. This amount was applied during the first six months of 2012.
Increase in Prices for Residential Plots
According to the National Bureau of Statistics, several cities in China undergo a monthly increase in residential home prices, as the cost has doubled in July 2012. The Bureau reported that the prices increased in 50 cities in the country although this excluded the affordable housing program subsidized by the government. In May, only 6 cities were affected by the price hike, yet this situation has become worse in July.
Zhang Hongwei, a real estate analyst at a Shanghai property research organization, reported an increase in sales of middle to high-end residential properties in China. The sales were higher in large cities beginning May 2012. However, more real estate developers have decided to trim or cancel discounts, which contributed to the high prices of these new homes.
Based on the data released by the China Index Academy, most new homes located in the 10 largest cities in China have an average cost of 15,470 yuan or US$2,436. In other cities such as Beijing, Guangzhou, and Shanghai, home purchase restrictions have been enforced. This has led to a price increase of about 0.3 percent since June 2012. However, new home prices in Shenzhen remained unchanged. As of this month, new homes with a total land area of 439,000 square meters were sold in Shanghai, which is lower by 16.8 percent from last month.
Mark Budden, an area leader at an asset consultancy in China, stated that it is too early to declare if this current situation in real estate prices will sustain its momentum. The restrictions imposed in purchasing homes, as well as the increase in property taxes, will possibly lead to a long-term growth in new home prices.
The current home market also presented similar gains. In fact, 38 cities in the country have a monthly price increase in July while attaining a maximum gain of about 2.2 percent. According to the bureau, the statistics were higher as compared to June, where only 31 cities had a maximum gain of 1.1 percent.
There is a continuing decrease in property sales between January and July 2012, and this is caused by the ongoing new home price increase in several cities in China. The country has tightened restrictions on the property sector, and this decision was aimed to bring residential home prices back to a much reasonable level. The government also implemented regulations in several cities that restrict home purchases while requiring expensive down payments to purchase these residential plots and houses.