China Real Estate Development Uptick Belies Slow Housing Sales

     BEIJING (MNI) - The surge in real estate development through the first nine

months of the year is at odds with a slowing pace of property sales, reflecting

developers' optimism despite the government's tightened controls.

     Total investment in real estate development increased 8.1% on a yearly

basis to CNY8.06 trillion from January to September, 0.2 percentage point higher

than the January-August period and 2.3 percentage points higher than the same

period last year, the National Bureau of Statistics said in a report on

Thursday. 

     Data show that construction and land acquisitions are still robust in the

property market, partly due to developers' fears that investment opportunities

may slide away by the end of the year.

     From January to September, housing starts -- which the NBS defines as the

floor space of newly built houses -- grew 6.8% year-on-year to about 1.3 billion

square meters, a slight drop of 0.8 percentage point compared with the first

eight months. 

     Property developers also acquired 167.33 million square meters of land, or

12.2% y/y growth and 2.1 percentage points higher than the January-August

period. In addition, land transactions grew rapidly at 46.3% to CNY814.9 billion

in the first nine months, 3.6 percentage points higher than the first eight

months.

     "It shows property developers still have confidence in the property

investment market," Yan Yuejin, director of the research department at E-house

Real Estate Research Institute, said in a note Thursday.

     Centaline Property Group chief analyst Zhang Dawei pointed out that

property developers are competing actively for land, especially in Tier-3

cities, and noted that robust development and sales in lower-tiered cities

offset the negative impact of the government's strict curbs on the housing

market in Tier-1 and Tier-2 cities.

     However, as the government's tightening measures on the sector continue to

bite, housing sales have slowed. Commercial property sales by area dipped to the

lowest level since the start of 2016 in the January-September period, with sales

by area rising 10.3% to 1.16 billion square meters, a decrease of 2.4 percentage

points compared with the first eight months of the year.

     The growth in housing sales alone in the first nine months also dropped to

the lowest level since the beginning of 2016. Though sales were up 14.6% to

CNY9.1904 trillion, it was 2.6 percentage points lower compared with the

January-August period.

     "The data showed the market has not completely cooled, although it has

cooled [to some extent]," Yan said, "A heating up of transactions in Tier-3 and

Tier-4 cities still helped underpin the base."

     The Chinese government's guidance to reduce inventory in lower-tiered

cities seems to have further eased inventory pressures. Housing inventories

decreased 12.12 million square meters at the end of September to 611.4 million

square meters, the lowest level in three years, according to Zhang of Centaline.

     But property developers find themselves in a stressful monetary situation.

Funds that property companies have available for property development grew 8%

y/y to CNY11.31 trillion, one percentage point down from the January to August

period, the NBS said. The growth was the slowest since the 7% rise in the

January to February period.

     Yan predicts housing sales will maintain 5% y/y growth for the full year. 

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

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