Home Price Must Rise 50 pc For Developer Profit

Home Prices need to rise 50 pc to make it profitable for developers, but second half prices are expected to be stable. This was forecast by CASS at the end of 2015 based on yoy comparisons: CASS: Third and Fourth Tier Housing Inventory Still Grim, Prices May Tumble in 2H 2016; Or Not

In addition to tougher comparisons, local governments are rolling out restrictive policies:

June home prices rose narrowed, both reflect the current status of the property market, but also reflects the trend of the property market in the second half. China Index Research report analyzes that the future regulatory policy further as the local landing embodiment, hot urban property market overheating will be controlled, the overall price increase in malls or will continue to slow down.

"To curb housing prices, hot urban policy tightening continued to upgrade, moving from control needs, adjusting supply and stable development of the property market." Chen Sheng said.

Reporters also noted that the recent housing prices rose significantly Hefei, will begin implementation of differentiated credit policy for buyers in July, raise the down payment threshold. Part of the "land" are frequent in the city, but also the introduction of relevant policies to curb market overheating. In addition, demand contradiction deeper Nanjing, also say to ease the tight supply situation of the local region, will further increase the supply of commercial housing listed in the second half of this year. Various initiatives around the country, is expected to make an "up" tone of voice of moderation among property elongated.

Developers will need price to keep rising though, given the price they've paid for land. In many cases, land prices exceed the price of finished homes:

July 1 Hong Kong media reported that Centaline latest statistics show that as of June 28, 50 mainland cities total land premium has reached 965.59 billion yuan, compared with last year soared 38.5%. In this regard, analysts pointed out that this year the high price, high price, high premium rate "three high block" common in second-tier cities, continue to stimulate the real estate market, floor price more than the house price has become the norm.

Prices may need to rise as much as 50 percent for developers to break even:

Centaline Dawei, chief analyst evaluation, said this year is the most concentrated year of high land prices in Chinese history, continue to stimulate the real estate market. "For the next three years, if this 191.938 billion yuan of high priced land does not see sales of 200 billion or more, it is likely some of the projects will run into financial trouble." Dawei said. In first- and second-tier cities, if prices do not rise more than 50% in the next year, developers who paid high prices for land will face market challenges, enormous cost pressure will cause great risk.

Place your bets.

iFeng:6月百城房价涨势趋缓 下半年“稳”字当头
iFeng: 港媒：内地50城卖地近万亿 一二线房价不涨50%难回本