In Jan-Nov 2014, China’s property sales reached a total of RMB 6,448.1 billion, which is down 7.8% year-on-year and trimming a 0.1 percentage point against Jan-Oct 2014. In other words, sales in home and office properties have dropped 9.7% and 20.9% respectively, whilst commercial properties have moved up to 7.2%.
After recent policy announcements in the real estate sector, the residential market appears to have gotten a strong boost. Due to benefits from the new policies on home mortgages and interest rate slash by the central bank, home prices in certain cities have started to see monthly rebounds, whereas those from tier-1 cities (e.g. Shanghai, Shenzhen and Guangzhou) have stabilised in October. Beijing’s home prices even got a slight rebound of 0.3%.
Continued slowdown in the growth of China’s economy is expected to be seen next year. However, inflation and unemployment are likely to remain stable. For China’s economy, exports will act as an upside catalyst, while the downside risk will be from the real estate industry. Tracking sluggish real estate sales this year, the total real estate investment may stay weak till early next year. Nonetheless, given the high inventory levels in most cities, the increased time for developers to have their land bank digestion and substantial market demand during the previous periods, completion in home price correction is yet to be seen. Whether the recent warmer market will be sustainable next year will very much depend on the additional effects from recent policy changes, alongside the higher market demand resulted from developers’ various home sales discounts. We expect mainland housing prices to grow mildly in 2015.