2015-05-13

China's Real Estate Market Still Under Great Pressure

China's real estate market won't be saved by rates cuts, and developers know it, which is why they're heading overseas or shedding assets.

The summary cuts to the chase:
on the one hand, since last November, the central bank cut interest rates drop quasi frequently, and central to the March 30 release of Real Estate Deal to stimulate the real estate market, the industry homeopathic sing: favorable policies, the market will welcome recovery; on the other hand, the fact that the second half of last year to lift the restriction ineffective but illustrate a problem: policy has not determined the fundamental market trends, replaced by supply and demand, but the oversupply of real estate industry is the fundamental issue at this time.
The optimistic view:
Real estate industry are positive and optimistic comments nature: monetary policy continue to force, a good deal of the property market is expected to continue.

CICC estate researcher peaceful whip said that according to estimates 25 bps rate cut , the equivalent of 20 to 30 of the total amount of mortgage loans also declined about 2.0% to 2.7% , a total 3 times since November of last year cut interest rates, the effect is equivalent to a decline in housing prices of 5.6% ~ 7.7% .

He went on to say, monetary policy signals clearly judged along with March 30 policies continue to fall over the real estate market better trading performance will continue in the future, the chain upward trend will become more apparent anticipation 30 cities sales volume will recover 5% to 10% in May and June.
The second view is the opposite: inventory is the issue, rate and RRR cuts are poison. One example is Shanghai, where property restrictions haven't been lifted, but sales and prices are picking up due to low inventory. In cities that have been aggressively easing policy, but are stuck with large inventory, prices are still falling. Another issue is monetary policy is losing effectiveness. The chart below shows national sales by area yoy in gray, Centaline's Shanghai index in red. The yellow circles indicate interest rate or RRR cuts.

SOHU overseas property chief commentator Liu Lei said: In the "do everything possible to reduce inventory" under the policy to stimulate the housing market will become more subtle game between buyers and sellers, many of whom misjudgment case occurs, it may lead to a brief rebound in housing prices in some areas, the current bailout policies can only provoke a small ripple in the wave of falling house prices....The most optimistic say that the current inventory needs at least 12 months to digest.

Now turn to the developers. What are they doing? Transforming their business models and heading overseas. Firms are opting for asset-light, financialization and Internet strategies. Wanda is pursuing the asset-light model as part of its fourth transformation:
Severely assets to asset-light transition, it is formally presented its recent transformation strategies Wanda fourth. With the transformation of Dalian Wanda from a local enterprise to develop into an international industry chiefs now listed in Hong Kong. This time, Wang Jianlin said, compared to the previous three transition, the fourth round of restructuring broader and more forceful, Wanda represent the future direction of the new upgrade.

He explained the transformation that past success by Wanda urban complex, through real estate sales cash flow to invest in Wanda Plaza, which is asset-heavy model. Wanda Plaza asset-light model is the design, construction, investment, operations, information systems, e-commerce is doing Wanda, Wanda brand use, but investment by the people of all the assets owned by investors.

This model is no real estate sales, prospective financial investment behavior, Wanda and investors a share of the net rental income, regardless of price changes or the market cycle for this model the impact is not large. Wanda's goal is to gradually increase the proportion of net rent.

...SOHO China in January on 6 May, 3Q release of new products , the use of the new way of the Internet, providing O2O for the migrants mode office space.

Property offshore real estate test the water all the chips, Greentown this year and vigorously promote the "cloud service" issues.

And the overseas moves:
May 11, Poly Real Estate formal announcement has been awarded Australia a commercial and residential land. Poly in the latest release of "5P "strategy, overseas real estate business will be the focus in the field of international development Poly Group. Earlier the company official interviewed said that during the year will continue to focus on expansion of the United States, Europe and other industrial opportunities.

Before Poly Real Estate, including green, Country Garden, Wanda, Rhythm and real estate, Fuxing Fitch, Suning Universal, Hailiang estate Fosun, in sharp real estate housing prices had entered the Australian market.

Recently, Fosun also received project land is located on Madison Avenue in Manhattan, New York City, the development of the construction of more than 200 47-meter-high layer of luxury residential buildings. In terms of directly held property assets investment, Fosun estate now has in New York, London, Sydney, Tokyo, Lisbon's number one hundred thousand square meters core properties.

iFeng: 为何说再大利好也救不了中国楼市:看看房企都在干什么

For the other side of things, Mingtiandi has a round-up of the optimistic view: OVER 90% OF CHINA DEVELOPERS EXPECT BOOST FROM RATE CUTS. From the report linked in the article:
Executives at nine developers told Reuters they were confident the latest rate cut would speed up investment, while three others said a decision on whether to ramp up spending depended on market sales.

Any pick-up in building by developers would be a boon to raw materials industries inside and outside China, which have been hit hard by the slowdown in the country's once booming property market.

..."The view of the industry is changing because prices in many cities have bottomed and started to rise," said a chief financial officer of one of the property companies based in eastern China.

"The impact is multifaceted. Rate cuts help the whole market sentiment, and a bullish stock market also makes homebuyers more upbeat about the housing market."

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