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Tue, 11 Sep. 2018 – 5:50
Pekin
Real estate prices and real estate investments in China are expected to increase further this year than expected, as tight controls in major cities continue to drive buyers to smaller, less regulated markets, according to a Reuters poll.
This recovery could provide much needed support to the slowdown in the Chinese economy as the United States raises tariffs on Chinese products, although policy makers should remain aware of the risk of property bubbles.
According to a Reuters poll of 16 analysts and real estate analysts, housing prices in China, where real estate growth of nearly three years has shifted from megacities to the hinterland, will increase by 5% this year and 3.3% in 2019.
This exceeds the 1% gain seen in a previous survey in March and is only slightly below the actual increase of 5.4% in 2017.
Real estate investment is now expected to grow by 8% this year, up 5% from the latest survey as developers seek to rebuild their housing stock and accelerate the construction of social housing.
"Although the escalation of Sino-US trade disputes will affect China's GDP, the domestic real estate market remains fueled by local supply and demand, so it is unlikely that it will change short-term cap, "said David Ji, head of research at real estate consultant Knight Frank.
US President Donald Trump warned on Friday that he was ready to impose tariffs on virtually all Chinese imports to the United States, threatening to pay an additional $ 267 billion in addition to imports of $ 200 billion.
The housing market in China – an important driver of economic growth – took off in early 2016 as the government relaxed buyer restrictions to help slow the economy and reduce large stocks of unsold homes. in small towns.
But the boom that followed soon raised concerns about a speculative bubble, forcing the authorities to take action such as restricting lending to the sector and sharply raising the bar for buyers. These moves helped reduce home price inflation by more than half in 2017, after a double-digit pace in 2016.
Yet analysts expect that many less regulated cities will continue to leap forward.
The pent-up demand is affecting the inhabitants of the tightly controlled cities of Levels 1 and 2, while price increases in smaller cities are pushing more local buyers to take the plunge thanks to massive government support to reduce stocks.
China has invested 990 billion yuan (198.3 billion Singapore dollars) in a major urban redevelopment project under the Guaranteed Additional Loan (PSL) program, widely used to compensate demolished residents.
Growth in real estate investment in China accelerated in July, reaching its fastest pace in almost two years, while property sales and new construction also rose.
"The sentiment of resilience and the generally modest stocks of unsold homes will support housing prices," said He Tianjie, of Oxford Economics.
Sheng Songcheng, a political adviser to the central bank, warned on Monday that China's poorly informed housing policies have skewed the market and that the country's housing stock has actually fallen to an alarming level. Only one analyst polled by Reuters forecast a decline in housing prices in 2018.
While Beijing softens general credit conditions in the face of slowing domestic demand, analysts believe it will be more prudent to boost real estate investment than in past recessions.
Most observers believe that the authorities will continue to crack down on illegal financing of the real estate sector, but their views differ as to whether regulators will ease restrictions on the access of private liquidity developers to other sources. financing.
"Real estate developers would not suffer much," said Iris Pang, an economist at ING Bank in Singapore.
"The next question is whether the transfer of the bonds would suffer from a higher interest cost, but as Shibor has fallen a lot, we do not see this as a big problem for most developers," she added. . a recent moderation in interbank rates following the injection of funds by the central bank.
At the same time, Chinese housing seems less affordable, posing a long-term risk as household debt rises and consumers have less to spend on other purchases.
When asked to rate the affordability of Chinese housing at a scale of 1 being the least expensive and 10 the most expensive, the median response was 7, an increase from the estimates. analysts of six in the last survey. REUTERS
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