March New Home Prices Decelerate; Sales Volume Continues to Sink; Some Developers Refuse to Sell; Speculators Jump The Gun on Policy Changes

Prices continue to decelerate, but are still increasing in nearly all major cities. This slowdown still hasn't approached the intensity of 2011, despite developer defaults and more widespread anecdotal evidence. Also, something that happened in 2011 is starting to happen again this year: developers are holding back new properties hoping for the price cut wave to pass. As one developer says below in the Chinese article, indebted developers are forced to sell, but he can wait.

China home price inflation cools to eight-month low in March
Average new home prices in China's 70 major cities rose 7.7 percent in March from a year earlier, easing from the previous month's 8.7 percent rise, according to Reuters calculations based on data released by the National Bureau of Statistics (NBS) on Friday.

In month-on-month terms, prices rose 0.2 percent in March, slowing from February's rise of 0.3 percent.

Analysts said the cooling of the property market is an initial indication of stabilization and they expected the easing trend to continue this year.

"Home price rises will continue to lose momentum this year as we have seen more developers start to cut prices," said Liu Yuan, a research head of property consultancy Centaline in Shanghai.

"However, we think the market will finally stabilize thanks to still strong demand and local governments' possible moves to ease restrictions on home buying," Liu said.

Here's the data, top table is housing, bottom table includes commercial properties.

Volume leads price and the data there suggests prices will decelerate into price declines.

地方政府密集调研楼市 投机客已准备好资金抢跑 (Local governments intensively investigate property market; speculators prepare to jump the gun)
Into April, the property market is still dense fog. The overall volume is still no improvement on the one hand, part of the city "discount, pad down "phenomenon emerged; the other hand, sales of big developers have released sales data remain strong, while all regions have rumored purchase of policy easing.

The impact of the share of investment funds is limited just around the corner, ran to grab a great purchase gate potential.

National turnover is still in the doldrums

April 16, the National Bureau of Statistics data show that first quarter commercial housing sales area of 201 million square meters, sales of 133 million yuan, representing a slight decrease of 3.8% and 5.2% yoy. Residential sales area, the amount of sales decreased by 5.7% and 7.7% yoy, respectively. This makes three consecutive months of negative growth in both. Meanwhile, the housing area of 520 million square meters for sale, representing an increase of 30 million square meters. And this year, the past three months show widespread price declines, it is believed first-tier city sales figures cannot escape the trend.

GF Securities monitored 44 cities nationwide volume display, March transaction size fell 38.7 percent first-tier cities, second-tier cities fell by 37.3 percent; third-tier cities but relatively well, down only 18.8%.

Previously the market was judged first quarter sales fell, mainly due to the Chinese New Year holiday factors, as well as last year's March sales base is too big factors. Into April and May, the situation should be improved.

However, affected by the first week of April Ching Ming holidays, sales are still no improvement; while April 7 to April 13 to continue deserted. BOCI Securities research report shows that the second week of April 17 key cities area of ​​2.304 million square meters in total turnover, down 9.6%.

With sales weak, sales promotion efforts are beginning to heat up. In the first quarter, Guangzhou recorded signed contracts on 16,194 primary residential units, an 40 percent drop. Followed by various types of promotions, including "zero down payment" "pad down" and other promotional most common, such as a large room's three high-profile real estate announced "first installment", more recently on the "free deed "and other promotions.

As of mid-April, Guangzhou has more than 20 projects launched similar activities, some of the projects buyers only pay 50,000 yuan deposit can be paid in full within a year, and even grace to 2 years.

There are developers sales director told reporters that such measures than the direct discount, the price effect is more obvious, but also help customers just need to purchase a larger, and therefore more and more developers to join the elements. In its view, the current market conditions, "is not a signal to turn down the property market, more like the next wave of rising property to build the base."

According to statistics, in March 2014, in the city of Guangzhou signed 6164 first-hand residential units, up 37.3 percent from February, down 43.8 percent yoy; But prices have shown that the average price of net signed in March was 15,500 yuan / square meter, up 19 percent from February, an increase of 6 percent yoy.

Poly Real Estate, said lead researcher Wu Dingjin, which helps explain the market reaction to the promotion of sensitive slight promotional prices have to keep up with rapid turnover, indicating that the property market is far from " turning point . " On the one hand, the majority of the capital chain more stable housing prices, the lack of actual price momentum; on the other hand land prices and lower development costs increased in the background, the price often means lower profits, developers still far from the "price change" in time.

The reason why Guangzhou developers do not panic is tied to the market supply and demand. DTZ statistics show that, despite a quarter of the property market turnover fell, but the Guangzhou property market supply and demand ratio of about 1:1.5, which is to say for every 2 houses developers bring onto the market, there are 3 houses sold.

But in cities with oversupply, price cuts become imperative. Early April Zhejiang Huayuan Property Group loudly announced it would liquidate a total of 160 houses, which Merrill mansion project discount as low as 32 percent. This local enterprises in Zhejiang price does not mince words, publicly announced that its project began on April 10 an overall decrease.

There are developers told reporters that part of the region to Hangzhou must cry out "price" in order to drive sales stage. "China Business" reporter previously reported, on March 20th Century Hangzhou Xiaoshan County area suddenly cut prices 10% to 20%, but even so the project 170 sets of special units, less than 50% sold in a week.

Coincidentally, Jinchang Group projects in Xiaoshan is currently priced at 19,000 yuan / square meter, but the floor price has reached 15,000 yuan / square meter.

And some developers told reporters that even with such a price the market, there are some areas sell issues. Linping Metro opened two years ago, had once reached 14,000 yuan / square meter, to this year prices have been lower than 10,000 yuan / square meter, "buyers have lost confidence", there are local developers told reporters.

Data show that the first quarter of this year, the main city of Hangzhou units for 5276 sets of real estate transactions, a record three-year low. And by the end of March the official website of Hangzhou adjusted data, the number of salable residential Hangzhou from 113,000 units adjusted to 74,700 units, to April to 76,000 units. Ignoring the current sales pace, even if sales were at their highest point in the past 5 years, the Hangzhou property market would need 13 months to clear the inventory.

Increasing pressure on local governments to relax regulation

"I simply do not sell." Hangzhou, a developer told reporters that they had been available in March for pre-sale permit. But given the market environment, simply hold. "Now sell, we must compete on price with the surrounding project." The source said, while some competitors are "high interest rates to borrow funds" operation, they must quickly return the funds.

More importantly, they believe that at the present developments in the market, the local government must loosen control policies. "When we met in March with regulators, says leadership is studying relevant policies." The source said.

It is understood, Hangzhou housing authorities early on were held closed-door meetings with developers in mid-March and early April. Topics discussed, in addition to the property status quo is the opportunity to relax regulation. During the two sessions, the real estate industry for the central proposed a "two-way regulation of" ideas, "classification regulation, the regulation of the city, no one size fits all." The Hangzhou Mayor Zhang Hongming previously said, will be based on national policy, further release of rigid demand autonomy and improve the type of housing. Because it directly affects the government's land revenue.

Reporters learned that the intention to adjust the purchase of the policy is not just one place in Hangzhou, including Jiangxi, Fujian and other areas have begun intensive research. GF Securities analyst also believes the policy side will change with changes in fundamentals, if market remains at a low running place to relax regulatory pressure will increase.

But up to now, Shanghai, Beijing and other cities housing authorities still maintain regulation emphasizes unchanged, while other cities have not formally relax the control message. "In fact now the power to regulate the real estate market belongs to the central government." An official in the Ministry of Housing and Urban-Rural Development told reporters that if the central government doesn't inspire it, the local governments don't dare introduce measures without permission.

At this time, will the developers have to take the lead and cut into profits? From the current situation, the large developers do not seem to be in trouble.

BOCI concern 27 listed real estate companies, announced on March 21 sales data, showing sales in March rose by 35.77% MoM, Q1 total sales fell by only 1.4% year on year. Insiders said the first quarter of 2013 was the most recent property sales booming nodes, developers cumulative sales fell only less than 2%, which does not have any pressure on them.

In fact if we open up the 2013 annual reports, most developers have reduced sales growth this year, Vanke, Country Garden, Lake and other developers will determine the growth rate of less than 20%, most of the developers have said that to rate has become the developer of most concern sales data. According to World Union Properties research statistics, this year the industry's overall supply area will increase by 10%. But how did the demand to be market tested, so large developers are most concerned about this data.

"If the government eases the purchase restrictions, there must be a wave of rapidly rising (sales)." Regional head of a real estate agency, told reporters before the purchase restriction policies, property investors would give money directly to the real estate agency, as long as there good housing, they would immediately buy. After the purchase restrictions, such "house flippers" dwindled by the day, but recently two weeks, our company saw a similar sudden increase in capital. Aforementioned Guangzhou real estate agency representative said.

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