Property

Mainland Housing Market 2017 Outlook



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New-home prices in most of the mainland’s first-tier cities dipped around 1-2% m-o-m in November, a further cooling from about 2-3% in October, according to the latest data of the National Bureau of Statistics. This is mainly due to the new round of cooling measures on purchase and loan restrictions launched during the National Day golden week holiday by around 20 local governments in order to cool down the overheat market.

Although prices have slightly adjusted, a significant decline in prices in first-tier cities is unlikely for the coming year as the fundamentals of these cities are more or less unchanged -- investing demand is still strong and inventory is at low levels. Since the latest round of cooling measures is tighter than the previous ones, which can stop some of the buyers who are unqualified from purchasing houses, housing sales amounts are expected to fall in 2017.

In the recent Central Economic Work Conference, Chinese leaders have made it clear that “houses are built to be inhabited, not for speculation”, showing that the government is determined to promote a stable and healthy development of the housing market in the future. Moreover, de-stocking in third- and fourth-tier cities has been highlighted in the Conference; yet it may be a challenging task since the government will take control of money supply at a macro level in order to control home prices in first-tie cities from further rising. Reducing liquidity in the market will make de-stocking more difficult than in the past when credit was extremely loose.

Policies on social and housing have to be improved in order to maintain first-tie cities’ price at stable levels and de-stock in third- and fourth-tier cities at the same time. Apart from control measures, enhancement on policies in response to reform in household registration, social security and taxation are needed, in order to cope with the difficulties in de-stocking in third- and fourth-tier cities. Meanwhile, land supply should be increased according to the future housing demand in each first-tie cities in order to maintain prices at stable levels.

The housing market is expected to be stable in 2017, given the market fundamentals are similar and the determination of the government to maintain stable price levels. Challenges still exist in de-stocking for third- and fourth-tier cities, where improvement in policies is need, and results are expected to see in longer term.