China property

China’s property market set for stability in 2017, experts say

A sharp decline in prices is ‘unlikely’ in the next 6-12 months, say Moody’s

PUBLISHED : Tuesday, 29 November, 2016, 12:33pm
UPDATED : Tuesday, 29 November, 2016, 7:43pm

China’s property market is likely to see a flat year in 2017 after authorities adopted stricter curbs on home sales in major cities, experts said.

October data has showed early signs of market cooling as the latest new restrictions resulted in significant reductions in transaction volumes and a contraction in the pace of price growth.

Moody’s expects nationwide home sales to be flat or slightly negative in 2017, against an already high base in 2016.

“Specifically, sales volumes will decline by around 5 to 10 per cent in 2017,” Kaven Tsang, vice president and senior credit officer at Moody’s said.

But the ratings agency believes a sharp decline in prices is “unlikely” in the next six to 12 months, given the relative low inventory levels in major cities.

We project a modest rise in selling prices that will partly offset the decline in transactions, Tsang said.

China’s total home sales by value rose 42.6 per cent in the first 10 months year on year, according to National Bureau of Statistics data.

David Hong, head of research at China Real Estate Information, echoed Moody’s view, but gave a slightly more positive outlook.

“China will still rely on the property sector to help maintain future economic growth,” said Hong.

Real estate and related industries accounted for nearly 20 per cent of gross domestic product in the first three quarters of this year, according to BOCI Securities estimates.

Hong expects sales volume to be stable while home prices will continue to rise 10 per cent next year.

The recent sharp decline in transactions, Hong said, was mainly because authorities in big cities stopped granting presale permits to developers who they say are charging too much for flats, rather than negative market sentiment.

Property curbs have been rolled out in 20 cities since September. These include raising the minimum down payment threshold for non-locals to purchase property in the city, and halting property companies from issuing domestic bonds.

Hong said if the housing market continues to cool in the first half of 2017, a new loosening cycle may begin in the second half, as the government seeks to support the sector.

Qiu Xiaohua, the former director of the National Bureau of Statistics and chief economist of Minsheng Securities, said in Beijing during the weekend that China’s real estate market has entered a stable growth period, while home prices in first-tier cities may pick up.