REPEAT:MNI: China '18 Property Outlook: Investment To Slow

Repeats Story Initially Transmitted at 08:28 GMT Dec 19/03:28 EST Dec 19

     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

double-digit growth. 

     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

property sector. 

     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.

     --CAUTION PREVAILS 

     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

Securities.

     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

year.

     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

inventories.

     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

said.

     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

investment.

     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

investment.

     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.

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

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