In China property oversupply to be digested at most within 2 yrs

[TaiShang]

Property oversupply to be digested at most within 2 yrs

A property construction site in Nanjing, capital of Jiangsu province. The average price of a new home in 100 cities tracked by the China Index Academy was 0.92 percent lower in September compared with the previous month. [China Daily]


China's all-important property sector is expected to return to normal in two years, said a leading economist.

The average price of a new home in 100 cities tracked by the China Index Academy was 0.92 percent lower in September compared with the previous month, the fifth straight monthly decline, according to the firm, a subsidiary of real estate portal SouFun Holdings Ltd.

The total value of housing transactions in the first eight months was 8.9 percent lower than a year earlier, according to the National Bureau of Statistics.

Figures for September have not been released.

The slowdown in the real estate sector is dragging on the economy. Together with construction, real estate accounts for about 15 percent of China's GDP.

Weak performance of this sector also affects many upstream and downstream industries such as cement, steel and chemicals.

Although many economists forecast the housing market will remain under downward pressure, some remain optimistic.

Cheng Siwei, dean of the School of Management of the Graduate University of the Chinese Academy of Sciences, said that the real estate sector will see healthy growth in the long run.

Cheng made the upbeat comment at the Oxford China Business Forum 2014 in Beijing recently.

The urbanization rate was 53.7 percent in 2013. An annual 1 percentage point increase in the urbanization rate could mean another 11 million people or more moving to cities each year.

Meanwhile, demand for new homes remains robust from recent graduates, newlyweds and current owners who are trading up.

According to Cheng, the oversupply could be digested in 20 months or at most two years, and the housing market will return to normal.

Most of the 46 cities that imposed limits on home purchases starting in 2010 have lifted those curbs to spur home sales.

"The demand for housing in China is still strong in major cities. We still need to restrict housing purchases in these cities … But for some medium-sized or small cities, we should encourage people to move to those cities," he said.

Breaking down property investment by source, about 30 percent is from bank loans, 39 percent is from developers' internal funds and 31 percent is from buyers' deposits, so bankruptcy risks are not high, he said.

The annual average GDP growth rate in the new "economic cycle" that started last year and will run through 2022 will range from 7 to 8 percent, Cheng said. Inflation during the same period will be no higher than 4 percent, he said.

 

[Maxtini]

China should thoroughly reform its Hukou policy first~
I doubt the oversupply will end if human mobility from rural to urban area is not addressed properly.

 

[TaiShang]

China should thoroughly reform its Hukou policy first~
I doubt the oversupply will end if human mobility from rural to urban area is not addressed properly.

It is certainly not an easy task to urbanize without getting filled with slums. China will macro-manage the issue even though it may take time and drastic measures.

 

[Guynextdoor2]

China should thoroughly reform its Hukou policy first~
I doubt the oversupply will end if human mobility from rural to urban area is not addressed properly.

Can you explain this policy please?

 

[Maxtini]

It is certainly not an easy task to urbanize without getting filled with slums. China will macro-manage the issue even though it may take time and drastic measures.

That is why the property oversupply in China won't subside in the near future.

Can you explain this policy please?

Hukou is a kind of household registration system in China. But unlike in other countries, hukou is tied to a lot of governmental services ranging from healthcare, education, employment, and even marriage. Furthermore, hukou is heritable and you cannot simply change it through simple administrative work.

With this system, the government could effectively curb uncontrolled urbanization seen in other developing countries. That is why you could not see any slum in Chinese cities.

This system work best for agricultural and manufacturing led economy, but with increasingly high-tech and services led economy, it will drag the Chinese transition to high income level.

 

[zeronet]

That is why the property oversupply in China won't subside in the near future.



Hukou is a kind of household registration system in China. But unlike in other countries, hukou is tied to a lot of governmental services ranging from healthcare, education, employment, and even marriage. Furthermore, hukou is heritable and you cannot simply change it through simple administrative work.

With this system, the government could effectively curb uncontrolled urbanization seen in other developing countries. That is why you could not see any slum in Chinese cities.

This system work best for agricultural and manufacturing led economy, but with increasingly high-tech and services led economy, it will drag the Chinese transition to high income level.

Hukou is now only effective for first tier or some second-tier large cities, u always hear complains on Hukou from Beijing, Shanghai, but do u hear a lot of them from Changsha, Zhengzhou, Dalian, Shenyang? No. In small to medium, even to some big cities, the reform on Hukou is not that painful and can be handled much more smoothly. However, those easy part accounts for almost above 80%. The hard part of less than 20%, including Beijing Shanghai, they are already overcrowded and don't expect too much in the near term. One big question left here is, however, do those peasants really want to transfer their Hukou from rural area to city? Big No. Because rural Hukou means FREE LAND, for house! That only brings Millions ¥¥¥. So u may see a Chinese high level manager working for HSBC in Shanghai financial district, driving a BMW7, while legally is a peasant shown by his Hukou.

 

[Edison Chen]

tl dr

The urbaniztion is not yet completed, there is still huge demand.

If you you pay off you mortgage of your first apartment, then if you buy another apartment, the second one is still deemed as the first one. This is a solution to the reduction of fiscal revenue due to the quota policy.

 

[Aepsilons]

tl dr

The urbaniztion is not yet completed, there is still huge demand.

If you you pay off you mortgage of your first apartment, then if you buy another apartment, the second one is still deemed as the first one. This is a solution to the reduction of fiscal revenue due to the quota policy.

Impressive to see the wide scale urban development of your country, buddy. Shear man power is just awing.

PS. Who's that in your avatar??

 

[Edison Chen]

Impressive to see the wide scale urban development of your country, buddy. Shear man power is just awing.

PS. Who's that in your avatar??

Andrew Lincoln, leading actor of AMC drama - The Walking Dead.

 

[desimorty]

I see a dangerous loop. market must correct itself...how will the CCP handle this? They have the cash, but to spend more? They need to buy forign now, because of the credit...hmmm....someone making lots of money.

 

[TaiShang]

I see a dangerous loop. market must correct itself...how will the CCP handle this? They have the cash, but to spend more? They need to buy forign now, because of the credit...hmmm....someone making lots of money.

Mmmm, someone sounds like an Indian troll.