An Uptrend In Chinese New Home InventoryInventory in Chinese new commodity housings climbed further to a record high of 550 million square meters by the end of July this year, according to the National Bureau Statistics. Nonetheless, the commercial housing stock amounted to just 190 million square meters since the Government’s introduction of home purchase limits four years ago, representing a three-fold gain. And total inventory level stood at 270 million square meters in the 35 Tier-1, Tier-2 and Tier-3 cities of China.

Both quarterly and annual inventory growth have been seen in the above mentioned 35 cities. In fact, the lackluster trading volume in the Tier-1 cities has already resulted in a rising inventory, and has already increased the chance for developers to have various price slashes in their respective projects. Anyhow, inventory in the Tier-2 cities posted the lowest growth, among Tier-1 and Tier-3 cities, partially reflect the effectiveness of the recent bailout plans for the housing market being introduced by many local governments. As such, market hopes to see whatever fine-tunings in the home purchase policy in the Tier-1 cities.

Uptrends in both inventory level and inventory cycle should continue to be seen in the near-term. Driven by a lower construction investment sentiment in the first half of this year, new home supply in the coming year could be inevitably affected. Sustainability in local government’s bailout plans for the real estate market in the medium-term will very much depend on the enforcement of the governments’ mortgage policy, their household registration policy, as well as their second home purchase policies. In fact, transaction volume in the first-tier cities has already dropped to below the nearest recent market downturn in 2011. Whilst there is an expected bottoming out of total transaction volume in the first-tier and second-tier cities, we may not rule out a possibility to have a rebound in Chinese new home sales by the end of this year.