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BEIJING (MNI) - Property experts in China mostly expect investment in the
sector to slow modestly next year as the government's curbs on the market
continue to have their desired effect, although viewpoints range from
expectations that the market will contract to those that see the possibility for
At the end of last month, the Ministry of Housing and Urban-Rural
Development, the Ministry of Land and Resources and the People's Bank of China
co-hosted a work conference of officials on their regulatory plans for the
The three central regulators stressed the goal of continued strong policy
controls on the sector. The "priority of priorities," they said, is further
stabilizing the property market and resolving risks that could lead to a bubble
in the sector.
Amid a tight regulatory environment, most experts and financial
institutions have projected that investment in the sector will increase from 5%
to 10% next year, although some have warned that growth could contract.
Through the first 11 months of this year, growth came in at 7.5%, which
analysts also expect to be close to the full-year figure.
Nomura Group, an Asia-headquartered global investment bank and financial
services provider, has predicted that property investment will grow 5%, saying
property developers may be more cautious in starting new projects as property
sales are dampened due to stricter government policies on home purchases.
The Chinese government has introduced over the past year a series of new
property policies in a bid to rein in surging housing prices and tackle a
potential property bubble. The measures include home purchasing quotas in
various cities, extending the waiting time a property can be resold, increasing
mortgage interest rates, and adding land supply.
A slowdown in sales has occurred as a result of the tightening. The most
recent data from the National Bureau of Statistics show that national sales of
"commodity housing" -- property units built by developers to be sold for both
residential and business use -- grew just 7.9% on an annual basis to around
1.466 billion square meters from January to November, or a whopping 16.4
percentage points lower than the same period last year.
Nomura said the slowing of funds available for developers -- usually an
accurate indicator of the future direction of property investment -- also
legitimize its prediction for lower property investment growth next year.
Like Nomura, a number of other financial institutions and analysts have
also predicted 5% growth for the sector, including Fitch Ratings and Haitong
Fitch Ratings said the deceleration would not be significant because the
sector would be buoyed by buyers making home purchases for fear of being priced
out of the market in the future.
--PROFIT MARGIN DRAGS
Haitong Securities, which is based in Shanghai, predicted that less overall
housing construction by property developers would occur due to expected lower
profit margins. Continuing regulatory curbs in Tier-1 and Tier-2 cities and less
demand for housing starts in Tier-3 and Tier-4 cities given a downsizing of the
government's shanty-town renovation program -- which was initiated by Chinese
Premier Li Keqiang to rebuild old and dangerous houses into new property units
-- are also expected to slow property investment, according to Haitong.
Compared with the 5% prediction for housing investment growth by many
financial institutions, Yan Yuejin, director of the Shanghai-based E-house Real
Estate Institute, told MNI that property investment growth is reach just 4% next
Yan said that property investment would not be too low and would still be
in positive territory because many cities and property companies would increase
their inventories next year, based on the current historic low level of housing
On the other hand, tighter financial controls foreseen for next year,
including the continuing deleveraging campaign, are expected to weigh on
property developers' financing options, thus slowing property investment, Yan
But as indicated by a record-high Property Prosperity Index of 101.63 in
the property data released last week by the NBS, some market participants are
still more bullish on the market next year.
Among them is China International Capital Corporation. The state-backed
investment bank expects property investment growth to reach least 10% in 2018.
CICC said its optimistic outlook is supported by a high year-on-year growth
of housing starts of 10% next year on at least 30% y/y growth of land
transactions this year and a relatively low level of housing inventory. CICC
added that the residential housing rental market could contribute to another 10%
of growth in total housing starts.
However, regulators and the government are speeding up the building of a
long-term property system, such as campaigning to increase rental housing units
across the nation, which some analysts said may weigh on growth, as property
demand would be directed to the rental market thus slowing property sales and
A long-awaited, and long-discussed, residential housing property tax could
also be discussed at the Central Economic Work Conference this week. Such a tax
would reduce speculation in the property market by increasing the cost of
holding properties, which would reduce property sales and thus property
Zhang Hongwei, director of the research department of Tospur Consultancy,
was less than chary about his outlook for the sector. Zhang told MNI that, "The
growth rate of property investment, housing starts, property sales and property
sales volume would dip ... and they could become negative in the middle or third
quarter of next year."
Zhang said his prediction was based on a high base this year, when most of
the property indexes are expected to achieve record levels.
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