Photo: China Photos/Getty Images
Beijing recently vowed to maintain a firm grip on its real estate market and we’ve previously reported that housing was “sending shock-waves” through the Chinese economy.But a new report from S&P analysts Christopher Lee, Bei Fu, and Frank Lu argues that the Chinese property market is stabilizing, that buyers are returning to the market and credit conditions are improving.
Here are some highlights from the report.
- Bright spots are emerging with property sales in the second quarter at a “healthier level”. But property prices will likely continue to be weak as developers try and clear their inventory. Prices should fall less than 5 per cent in the second half of the year.
- The recent improvement in property sales can be attributed to pent-up demand and increased credit via reserve requirement ratio cuts. “In our view, the sales improvement stems from buyers’ expectations that property prices have bottomed now that government policy is becoming less severe.”
- Credit conditions have improved compared to the beginning of 2012 but lenders are still “cautious toward the property sector due to the banking regulator’s concerns over risky property lending and the developers’ uneven property sales performances”.
- While the government isn’t expected to announce major policy changes, the policies could differentiate between owner-occupiers and investors.
- “We believe that home purchase restrictions will likely stay well into 2013. On the other hand, the government will continue to ease funding and mortgage rates for first-time buyers. We don’t expect the government to introduce additional measures to tighten the property market because this could increase the downside risk to the economy–unless property and land prices rise significantly.”
- The commercial property sector is in better shape that the residential property sector. Rents in Beijing and Shanghai have recovered and are above 2008 peak levels.
- China’s property sector will see consolidation as larger developers increase their market share.