First-tier Home Price Decline Coming as Rents Fall, Sales Tumble

Leaving aside price appreciation of a home, renting is a terrible way to earn money in China. Even before costs, the yield is low single-digits in cities such as Beijing. A money market account pays 4 percent without the hassle. Now rents are coming down in Shanghai, the first time in 10 years.

One example is given of how much cheaper it is to rent:
Let us give an example to Shanghai Yangpu District, for example, the area nearly a month the average price of 77,118 yuan / square meter, while the local one room rent is now 3200 yuan / month or so. To a room 60 square meters as a standard, to buy a suite to spend 4.277 million yuan, and rent 70 years only need to spend 2.688 million yuan, almost 58% of the cost of purchase.

A set of 60 square meters of a room, the monthly rent is about 54 yuan per month, the rental ratio = per square meter monthly rent / house price = 1: 1428. This number is far more than a reasonable interval of 1: 200-1: 300.

iFeng: 北上广深的房租降了 租房还是买房你怎么选?
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Sales volume is also collapsing, which along with the various rules such as holding periods, is pushing more properties onto the rental market. Detached homes are holding up, but not apartments:
According to the Beijing Golden Gulf billion information released data show that May 21 to May 27, Beijing villa a total of 112 transactions, compared with the previous week to reduce 6 sets. January to April 2017, Beijing villa market supply 1129 new homes, down 28% yoy; turnover of 2042 sets, up 17% yoy; turnover of 515,900 square meters, up 4% yoy. There are real estate analysts on the China Securities Journal reporter said villas and other high-end residential projects due to the higher positioning of the crowd, purchasing power, buying and selling is relatively stable, less affected by the policy control.

Compared to the villa project for the situation of less than demand, ordinary commercial housing, business to change the project, whether it is new or second - hand housing market, there has been a sharp decline in turnover of the situation. The above data show that the new housing market in Beijing, May 21 to May 27, 404 sets of ordinary residential goods turnover, compared with last week to reduce 49 sets.

According to the chain data center show, in April 2017, Shanghai hand housing turnover of about 670,000 square meters, decreased by 9.4% mtm, down 30.8% yoy; Shanghai city existing homes residential turnover of 15,500 units, fell 20.4% mtm, down 9.4% yoy, transactions in April were their lowest since 2010. The real estate analysts said that the current Beijing and Shanghai first-tier cities in general commodity housing than the current round of property market regulation, weekly trading volume data 30% to 50% decline, the control effect is extremely obvious.
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The articles have an anti-rent tone, that renters will be second-class citizens. That argument made sense 5 years ago given the subsequent run-up in home prices, but how much farther can prices go if rental yields are 0.9 percent and falling? The cash flow won't even cover the mortgage. Reasonable by Chinese standards is 4 to 6 percent yield. After expenses, the money market is a better option for cash flow. The only reason to own a property is for price appreciation and the protection it offers from inflation. This makes sense in the long-term, but people don't always think about the long-term, especially when there's a cash crunch or negative economic and financial conditions squeezing short-term cash flow.

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