- China started a shanty town renovation program in 2015 in an effort to drive home sales in lower-tier cities, helping lift the country’s property values over the past few years.
- To calm the red-hot housing market, the central government applied a series of measures to punish speculators, such as setting higher down-payment ratios and mortgage restrictions.
- The Chinese government has continued to tighten property controls amid a slowdown in the economy, and 2019 could be a year of softening housing data, an analyst said.
The country’s property market directly contributes over 10% of annual GDP and has added 0.8%-pts to the country’s annual growth during the past decade, according to Julian Evans-Pritchard, a senior China economist at Capital Economics. But the Pritchard expects its contribution to be less than half as large over the next 10 years.
To calm the red-hot housing market, Beijing has pared back compensation for the renovation program and applied a series of measures to punish speculators, such as setting higher down-payment ratios and mortgage restrictions.
While the government continues to tighten property controls and as China’s economy cools down, its housing demand has finally begun to slow.
In the first 10 months of this year, China’s home-sales growth plunged to 2% from last year’s 8%, according to Macquarie’s data. Reuters separately found in September and October, which Chinese property developers consider their “gold and silver” months for sales, home sales tanked at a double-digit rate and Chinese property giants such as Vanke faced massive protests after offering new buyers 30% discounts.
Deverell expects the home-sales growth to continue falling and price growth to slow to a level more consistent with softer sales.
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