The property market in China is showing signs of improvement but some experts are warning that it is a temporary blip and that the value of real estate could fall by up to 50 per cent, agency reports.

Meanwhile, official figures from the latest index from the National Bureau of Statistics show that the volume of real estate sales in the first quarter of 2009 rose 8.2 per cent from a year earlier.

While overall average prices are not improving, property prices in urban areas rose 0.2 per cent in March putting an end to seven consecutive months of price falls.

Meanwhile, the value of nationwide property totaled $74.5 billion in the first quarter, up 23.1 per cent from a year earlier.

However, experts are warning that volumes are up because prices are falling and they need to go down even further. “Property sales are in an early recovery in major Chinese cities as prices drop to an acceptable range for some buyers,” said Xing Ziqiang, an economist at China International Capital in Beijing.

“However, property prices may need to drop another 5 to 10 per cent to ensure a sustainable recovery in both sales and property investment,” Ziqiang added.

Indeed China's property market could fall by 40 to 50 per cent in value during the next two years, as transaction activity subsides and as the export sector continues to slump, according to another economist.

Cao Jianhai, a professor at the Chinese Academy of Social Sciences, said that the current rebound in the property market was unsustainable and driven by a flood of liquidity and fraudulent activity rather than real demand.

Jianhai explained that this would not be immediate and that housing prices were likely to collapse next year, followed by many years of stagnation.

Cao also pointed out that the average property prices are now 10 to 12 times the average income. As a result, about 60 per cent of a homebuyer's monthly income must to go to mortgage repayments.

Vanke, China's biggest listed property developer, warned that although there are some signs to be positive about, especially in the large urban areas, the state of the real estate market is still fragile.

The company confirmed that its property sales in March fell 8 per cent from a year earlier to $898.3 million, and said that the market remained weighed down by weak prices.

However, its sales figures were up 57.8 per cent from February while the volume of space sold during the month rose 0.5 per cent from a year earlier, and 39.8 per cent from the previous month.

Vanke executive vice president Shirley Xiao said that property sales in China's big cities had shown strong growth in the first quarter of this year, boosted by price cuts and cheaper mortgages, although he described the market as still fragile.

April 15, 2009
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  • Dear friend,

    How much a sq. ft. of built up area costs in China, say for a 2 bed flat of 1000 sq. ft. in a city comparable to Chennai. How much is it in other countries like UK, USA, Germany, Japan etc.

  • A significant event?

    China is reputed to have pumped in a stimulus program in 2009 which was bigger even than the one by the US in terms of its GDP.

    And a large chunk of this is rumored to have gone into property speculation with all kinds of wild allegations. Probably true because recently, last month, property prices had risen by 20% in a single month!!!

    The Govt has probably reached a crisis-resolution situation before the whole thing blew up. They have asked ALL State companies whose core business is not property, to put up an total exit plan within 15 days.

    In another move they are looking towards investigating speculative and hoarding practices and insisting on 70% of all land coming into the market this year to build affordable housing!

    There are many signs that economists are using to predict a significant cooling of the economy to lower growth rates.

    We need to see what effect this will have, coupled with the sovereign debt issues in many parts of the world, on the double dip. Of course, we will not for some time to come, but this might be a significant inflexion point.

    The link ...

  • Some more data on Chinese RE Bubble

    Check out this interesting link ...

    Talks of price of 1500 SFt flat at $615k (2.75 Crores?) and a rent to price ratio of 1:500 (far higher than the 1:300 which we think is very high!!!

    Another article talks of a 31% decline in Beijing RE prices. Check this out here ...

    Coupled with the steady decline of the Shanghai Composite (20% from its 2009 peak) something big and nasty is brewing in China!