Concrete Analysis | China housing market to cool down but not collapse
Smaller price rises, rather than a slump in overall mainland homes market likely, but sales to suffer in some lower-tier cities
It has been widely observed that price growth momentum is slowing across most of China's larger- and medium-sized cities, but fears over an imminent market collapse following the recent spate of discounting now appear unfounded.
With respect to residential pricing in China, we expect this year to be one of deceleration in pricing growth, but with the rate of decline varying considerably across cities at different tier levels.
However, these phenomena taken together do not portend a larger slump in the market, but rather a slowdown that is likely to be cushioned by the central government starting to adopt a less interventionist stance with respect to curtailing demand.
On February 18, homeowners at two residential projects in Hangzhou protested outside the developers' sale offices, alleging that the discount scheme for new batches of units was unreasonable.
After a time of soaring home prices, ordinary residents have become increasingly sensitive about any downward movement in property prices.
Yet recent house-price discounting and the public outcry that ensued from buyers in earlier phases are nothing new in China. Similar events occurred in 2008 and were quickly resolved: it does not foreshadow a wider and major slump in the market, as alleged by some commentators.