CHINAMacroReporter

China’s property market risks are rising, says data expert

Price trends in China’s housing market are unsustainable, according to Real Estate Foresight chief executive Robert Ciemniak who worries that excessive leverage among homeowners could lead to a crisis. Real Estate Foresight founder and chief executive Robert Ciemniak has made it his business to gather and interpret real time data on China’s residential property market. He gives his thoughts on what’s to come in China’s housing market.
by

Ryan Swift

|

South China Morning Post

September 12, 2017
China’s property market risks are rising, says data expert

What do you regard as the key indicators to watch when forecasting property prices in China’s major cities?

Our analysis shows sales volume growth tends to lead house price growth. But one must be wary of headline-only figures. For example, June national sales volumes growth was plus 14 per cent year-to-date, year on year. But the figure was minus 26 per cent for Tier 1 cities. Understanding policy shifts remains critical as the market continues to follow policy-driven cycles of easing and tightening.

To what extent are housing markets in different cities diverging in terms of prices and market forces?

Sales and price performance are highly divergent across city tiers and also districts of cities. Currently, the momentum is with the lower-tier cities, where prices and volumes are picking up.

China seems to have embarked on a plan to create several “megacities”; how do you anticipate developments like this affecting prices and the movement of people?

I think the high-speed rail lines and metro lines connecting mega cities with smaller cities are the most important factors. It has contributed to the boom in lower tier cities, possibly with a twist. People will move to bigger cities, make money there, but get outpriced. They can buy property back in their hometown easily.

Systemic risk is said to be accumulating in the form of rapidly rising Chinese household debt, mostly used to buy property. Could China be setting itself up as the world’s next financial crisis instigator?

Yes, the risk is certainly building up. It goes up with any increase in leverage, as has been the case for housing, but the starting point was quite low. We are probably at the point now where, if this continues, it could be a real systemic problem.

You have mentioned that the property development sector in China is very fragmented. Is this changing or evolving?

It’s a large, fragmented market for new home sales. There are over 1 billion square metres gross floor area in annual sales, and even the largest Chinese developer only sells around 2 to 3 per cent of that each year. Institutional investors focus on the top 10 or 20 listed developers in Hong Kong; but there are around 90,000 ‘real estate development enterprises’ in China, according to the National Bureau of Statistics.

There are drivers for consolidation. Limited land supply and rising land prices means it might be easier for larger players to buy smaller developers or their existing projects, rather than buy new land at auction. As policy tightens, more developers could therefore wind up being bought by larger developers.

Where are we now in terms of policy and what do you foresee for overall prices in the next few years?

We entered a clear policy tightening cycle around the end of September last year, with a visible slowdown in sales and price growth as a result. But we haven’t yet seen any interest rate hikes that would really affect the market, as mortgage lending has grown significantly.

I think the cycles will continue over the next few years, with this cycle being more important given the need for market stability ahead of the Party Congress in a couple of months.

What sectors of the property market in China do you see as having the best near to midterm future?

I think the new home sales market is becoming a ‘product market’, i.e., the quality of the product – the design, layout, size, fit-out – matters much more. Among major cities, we see positive near-term momentum in Wenzhou, Ningbo, Shenyang, Beihai, Chongqing and Dalian.

This article appeared in the South China Morning Post print edition as: Policy key indicator for China market

More

CHINAMacroReporter

February 26, 2021
'Inside Xinjiang’s Prison State'
‘After years of first denying the facilities’ existence, then claiming that they had closed, Chinese officials now say the camps are “vocational education and training centers,” necessary to rooting out “extreme thoughts” and no different from correctional facilities in the United States or deradicalization centers in France.’
keep reading
February 24, 2021
Japan Is the New Leader of Asia’s Liberal Order
‘In an era of Chinese bellicosity, North Korean provocations, and a raging pandemic, Japan’s inconspicuous ascent to regional leadership has gone mostly unnoticed.’
keep reading
February 23, 2021
‘Patriots’ Only: Beijing Plans Overhaul of Hong Kong’s Elections
‘China plans to impose restrictions on Hong Kong’s electoral system to root out candidates the Communist Party deems disloyal, a move that could block democracy advocates in the city from running for any elected office.’
keep reading
March 9, 2017
So many twists and turns to the China Housing markets story
[CHINADebate Presentation] One of the highlights in our recent 'In Pursuit of Patterns' series of client notes, showed that the land sales growth had tended to lead the price growth and a significant increase in land sales would lead, with a lag, to the subsequent correction in prices.—Almost everyone on the outside seems to have missed the biggest bull market in China housing in 2016, culminating in policy tightening cycle kicking in at the end of the year. But what's next?
keep reading
February 27, 2017
Is The U.S. Ceding Global Leadership To China?
'China isn't positioned to replace the U.S. as a global leader anytime soon.'—Hard on President Trump's 'American First' inaugural address, Xi Jinping gave a rousing paean to globalism at the World Economic Forum. And, immediately the hot question became: 'Is the U.S. ceding global leadership to China?' Yes and no, says Bill Overholt of the Harvard Asia Center. Yes, the U.S. is ceding global leadership. No, China won’t replace the U.S. What will replace the U.S. is ‘G-Zero’, a world with no single global leader. Not China, not the U.S. So, can his critics lay this outcome at President Trump’s feet?
keep reading
February 15, 2017
C-to-C Internet Commerce- From Taobao Shops to Taobao Villages
One is some of the local government-owned SOEs are the sources for overcapacity. The reason is because the local government also wants to ensure there's some degree of employment locally, and perhaps some source of taxation. The Chinese government is now going to need to start the so-called supply-side economics to try to consolidate overcapacity in a number of sectors. It's going to impinge on the interests of many of these local SOEs as well as the local governments who own them.
keep reading
February 15, 2017
How SOEs & Local Governments Create Overcapacity
One is some of the local government-owned SOEs are the sources for overcapacity. The reason is because the local government also wants to ensure there's some degree of employment locally, and perhaps some source of taxation. The Chinese government is now going to need to start the so-called supply-side economics to try to consolidate overcapacity in a number of sectors. It's going to impinge on the interests of many of these local SOEs as well as the local governments who own them.
keep reading
February 15, 2017
Why SOE Reform is So Tough
'...SOEs need to reform, because on one hand, many of them have achieved a lot for China. On the other hand, they've actually created quite a lot of harm, in particular in the areas of overcapacity but also in the areas of corruption we've talked about.'
keep reading
February 2, 2017
AmCham China Chairmen's View From China in D.C. 2017
[AmCham China & CHINADebate U.S.—China Trade/Business Series 2017] Terrific insights from leaders on the ground in China. While in D.C. the Chairmen joined us in a panel discussion and individual interviews about U.S. business in China, U.S.-China relations, trade, and much more. We present their views in a 13 part series. Sheryl WuDunn, business executive, lecturer, best-selling author, and winner of the Pulitzer Prize moderated.
keep reading
February 1, 2017
'Chinese Politics In The Xi Jinping Era'
[Malcolm Riddell Interviewed Cheng Li] 'If you ask any taxi driver in Beijing, Shanghai, or Guangzhou, he or she will tell you – with accuracy – which leader belongs to which faction. : 'China is a one–party state, but that does not necessarily mean Chinese leadership is a monolithic group with leaders who have the same ideas, same background, same world views, same politics. No, they're divided.'
keep reading
December 7, 2016
First 100 Days: Do Not Provoke China
The First 100 Days interview series features Pacific Council experts addressing the top foreign policy issues facing the incoming Trump administration.: Warns of the potential for new conflicts if Donald Trump follows through with his campaign promises regarding China.
keep reading
October 18, 2016
How Alibaba, Xiaomi, & Tencent are Changing the Rules of Business
[An Interview of Ed Tse, the author of 'China's Disruptors: Alibaba, Xiaomi, & Tencent... how innovative 'Disruptor' companies are restructuring China's economy.' ] The real force in Chinese economy is increasingly private companies, not SOEs. / Leading private Chinese companies are innovative and ambitious
keep reading
July 14, 2016
How 'Brexit' Will Impact China's Economy
David Dollar gives you fresh insights to better incorporate Brexit's impact into your analyses of China and global economies & markets, including: 1. Why, after the Brexit vote, did the Shanghai Stock Market fall only 1%? 2. How will Brexit affect the value of the RMB and China's currency policy? 3. How will Brexit impact trade with the EU, China’s largest trading partner? 4. Why, in the larger geopolitical perspective, could China be the big winner from Brexit?
keep reading
July 2, 2016
China housing: boom, bust, or bubble-or...?
100s of Cities Bubble Up & Down As Policy Makers Press the Levers China hasn’t collapsed. And, the bubble hasn’t burst because there may not be just one big real estate bubble. Instead, there are 100s of sizable cities, each moving in its own cycle, each responding to how its local policymakers stimulate & tighten-stimulate & tighten, and each having performance divergent from that of other cities. Watch here to see how city-level markets bubble up and bubble down...
keep reading

Heading

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim in eros elementum tristique. Duis cursus, mi quis viverra ornare, eros dolor interdum nulla, ut commodo diam libero vitae erat. Aenean faucibus nibh et justo cursus id rutrum lorem imperdiet. Nunc ut sem vitae risus tristique posuere.