China Property Market 2015 ReviewThe Chinese government has put in place different kinds of stimulus policies throughout the year of 2015. For example, besides the 1.65 percentage point reduction and the 3 percentage point banks’ reserve ratios reductions since November 2014, the government, through the 330 policy, has also reduced the down payment required for the purchase of second homes to 40%. In 2015, Chinese residents can now apply for Personal Housing Accumulation Fund Loan in districts other than where the accumulation fund is based.

Thanks to the many stimulus policy implemented, both transaction volume and average prices have gone up in Tier-one and some of the Tier-two cities in 2015, with Shenzhen showing the greatest increase in price, rising a staggering 50% throughout the year to around RMB 39,000 per sqm on average. Meanwhile, prime luxury projects started in 2013 were launched throughout 2015. The prime-luxury property market with prices over RMB 100,000 per sqm had been so active in 2015 that the year has become the industry’s “year for luxury homes”. Yet, the growth in Tier-one city prices declines as 2015 comes to an end and the market’s performance during the traditional high-season of September and October was not as good as the industry had hoped for. Further to that, the number of cities with average prices falling in the 70 major cities studied by the National Bureau of Statistics increases.

Yet, the diversification in prices in different districts of the country has worsened in 2015. Prices in Tier-one cities continue to rise while prices for Tier-three and Tier-four cities with high destocking pressures continue to fall. The diversification in prices has also led to another prominent feature of the year 2015, i.e. expensive land prices. Land lots in Tier-one cities, especially in Q4, have often been sold at prices higher than that of developed projects in the area. Developers, benefiting from the low capital costs, are investing in Tier-one cities where prices are still rising and avoiding Tier-three and Tier-four cities where prices face high destocking pressure. This, in turn, further worsens the diversification problem in prices.

The Chinese property market has always been one of the country’s most important economic sectors. President Xi has first openly expressed his views on the need to maintain sustainable growth in the property market in the November meeting of the Central Leading group for Financial and Economic Affairs. Many more stimulus policies can therefore be expected. Yet, as shown by the latest statistics, the purchasing power of the market is decreasing gradually and hence, it is hard to see surges in prices as seen in Shenzhen in 2015 to happen again next year.