Research Powered by Technology

Real Estate Foresight

ALL ANALYSES BY

Real Estate Foresight

2017 China Property Report

One of the highlights in our recent 'In Pursuit of Patterns' series of client notes, showed that the land sales growth had tended to lead the price growth and a significant increase in land sales would lead, with a lag, to the subsequent correction in prices.

China December house price growth

In December, new home (“commercial residential”) sales by developers increased (in GFA) by +5.3% year-to-date year-on-year (yes - still the same figure as the weighted price year-on-year growth), compared to+5.4% in November.

New home sales slowed down, 2017 the strongest ever in annual sales

In December, new home (“commercial residential”) sales by developers increased (in GFA) by +5.3% year-to-date year-on-year (yes - still the same figure as the weighted price year-on-year growth), compared to+5.4% in November.

Land sales growth strong, but from relatively low levels

Land acquisition by developers (measured in the construction area) increased by +15.8% year-to-date year-on-year, compared to +16.3%in November. This is a strong pickup in land sales in 2017, though from relatively low absolute levels after the earlier declines.

One of the highlights in our recent 'In Pursuit of Patterns' series of client notes, showed that the land sales growth had tended to lead the price growth and a significant increase in land sales would lead, with a lag, to the subsequent correction in prices.

Monthly property market indicators (October vs September)

Real Estate Foresight has published the flagship monthly China Property report for November 2017, the most comprehensive analysis of the China housing markets, covering house prices, sales volumes, inventory, land sales, construction indicators, developer performance and an extensive range of macro indicators, as well as the Western media sentiment.

Price Change for 70 Cities 12M vs 3M (October 2017)

Volume growth decelerated further in September across tiers

Price Change for 70 Cities 12M vs 3M (September 2017)

China housing: What’s changed Jan vs Jun 2017?

This chart shows what really changed in the China housing market between January and June this year, using the year-on-year house price growth rates for 70 cities (NBS data). Back in January, there were quite a few cities in the 20%+ bucket. They subsequently cooled off, while the longer tail rose across, slightly. From our monthly China Property report for July.

Real Estate Foresight has published the flagship monthly China CityScreener(TM) report for November 2017, a data-driven analysis of the housing markets at the city-level across 70+ major cities in China. Beihai, Xi’an stand out on price growth over the recent 3- and 12-month periods, with the cities in the North East performing particularly (relatively) well, esp. Harbin. The 70+ page report and chart book is available to China Forecast subscribers only (directly and via Bloomberg/Thomson Reuters), free trials available on request.
Keep Reading
Close

Applying AI / Machine Learning To Identify Patterns In China Housing Markets

Real Estate Foresight has published a series of notes to clients under the theme “In Pursuit of Patterns”, revealing some interesting patterns (or lack thereof) found among the key indicators for the China’s housing markets (house prices, sales volumes, land sales) and their relationship to the overall stock market and Chinese developers stocks

Keep Reading
Close

China’s property market risks are rising, says data expert

Photo: Jonathan Wong

Price trends in China’s housing market are unsustainable, according to Real Estate Foresight chief executive Robert Ciemniak who worries that excessive leverage among homeowners could lead to a crisis. Real Estate Foresight founder and chief executive Robert Ciemniak has made it his business to gather and interpret real time data on China’s residential property market. He gives his thoughts on what’s to come in China’s housing market.

What do you regard as the key indicators to watch when forecasting property prices in China’s major cities?

Our analysis shows sales volume growth tends to lead house price growth. But one must be wary of headline-only figures. For example, June national sales volumes growth was plus 14 per cent year-to-date, year on year. But the figure was minus 26 per cent for Tier 1 cities. Understanding policy shifts remains critical as the market continues to follow policy-driven cycles of easing and tightening.

To what extent are housing markets in different cities diverging in terms of prices and market forces?

Sales and price performance are highly divergent across city tiers and also districts of cities. Currently, the momentum is with the lower-tier cities, where prices and volumes are picking up.

China seems to have embarked on a plan to create several “megacities”; how do you anticipate developments like this affecting prices and the movement of people?

I think the high-speed rail lines and metro lines connecting mega cities with smaller cities are the most important factors. It has contributed to the boom in lower tier cities, possibly with a twist. People will move to bigger cities, make money there, but get outpriced. They can buy property back in their hometown easily.

Systemic risk is said to be accumulating in the form of rapidly rising Chinese household debt, mostly used to buy property. Could China be setting itself up as the world’s next financial crisis instigator?

Yes, the risk is certainly building up. It goes up with any increase in leverage, as has been the case for housing, but the starting point was quite low. We are probably at the point now where, if this continues, it could be a real systemic problem.

You have mentioned that the property development sector in China is very fragmented. Is this changing or evolving?

It’s a large, fragmented market for new home sales. There are over 1 billion square metres gross floor area in annual sales, and even the largest Chinese developer only sells around 2 to 3 per cent of that each year. Institutional investors focus on the top 10 or 20 listed developers in Hong Kong; but there are around 90,000 ‘real estate development enterprises’ in China, according to the National Bureau of Statistics.

There are drivers for consolidation. Limited land supply and rising land prices means it might be easier for larger players to buy smaller developers or their existing projects, rather than buy new land at auction. As policy tightens, more developers could therefore wind up being bought by larger developers.

Where are we now in terms of policy and what do you foresee for overall prices in the next few years?

We entered a clear policy tightening cycle around the end of September last year, with a visible slowdown in sales and price growth as a result. But we haven’t yet seen any interest rate hikes that would really affect the market, as mortgage lending has grown significantly.

I think the cycles will continue over the next few years, with this cycle being more important given the need for market stability ahead of the Party Congress in a couple of months.

What sectors of the property market in China do you see as having the best near to midterm future?

I think the new home sales market is becoming a ‘product market’, i.e., the quality of the product – the design, layout, size, fit-out – matters much more. Among major cities, we see positive near-term momentum in Wenzhou, Ningbo, Shenyang, Beihai, Chongqing and Dalian.

This article appeared in the South China Morning Post print edition as: Policy key indicator for China market
Keep Reading
Close

So many twists and turns to the China Housing markets story

CHINADebate Presentation
Analysis by Real Estate Foresight

Almost everyone on the outside seems to have missed the biggest bull market in China housing in 2016, culminating in policy tightening cycle kicking in at the end of the year. But what's next?

China Property—2017 Forecast

Land acquisitions in Beijing (2007-2015).gif
Keep Reading
Close

China housing: boom, bust, or bubble-or...?

CHINADebate Presentation
Source: Analysis by Real Estate Foresight based on data from NBS, Datastream
How China's City-Level Property Cycles Work

100s of Cities Bubble Up & Down As Policy Makers Press the Levers China hasn’t collapsed. And, the bubble hasn’t burst because there may not be just one big real estate bubble. Instead, there are 100s of sizable cities, each moving in its own cycle, each responding to how its local policymakers stimulate & tighten-stimulate & tighten, and each having performance divergent from that of other cities. Watch here to see how city-level markets bubble up and bubble down...

How China's City-Level Property Cycles Work

This provocative analysis comes from Robert Ciemniak and his colleagues at Real Estate Foresight.To better understand what's happening in the animation, watch Robert explain...   

As You Watch the Animation

  • Note the few times in the cycles when full-press government policies stop all price rises and even cause declines. This shows pretty dramatically that, for all the hand-wringing, the government has the tools to cool the market when it wants to.
  • Pay special attention to how Tier 1, 2, & 3 cities change places with each other, depending on how rigorously the cooling policies are implemented in each city.
  • For fun, watch how Shenzhen goes off the chart, then spectacularly crashes as the local policies kick in. 

More on How This Works 

A city stimulates its property market. Sales pick up, housing prices rise, and then spike. The local government, under direction from the central government, puts the screws on the market, and prices go down.

Investors and speculators then switch to a city with laxer policies. Prices spike; regulations tighten; prices go down. They move on.

After a city goes into down-cycle, the time will come to again stimulate its market. And, soon, back come the investors and speculators.

A pattern seen over and over again all over China.

But, speculators and investors aside, demand continues from families upgrading to better/larger apartments, replacing old-style housing, moving to other cities and from urbanization generally (not the urbanization rate is still only around 56%).

12M House Price Change in 100 Cities (Monthly June 2011—June 2016)

‍Source: Analysis by Real Estate Foresight based on data from SouFun CREIS

12M NBS New Home Price Change in 70 Cities (January 2012—October 2017)

‍Source: ‍Real Estate Foresight analysis based on data from NBS

12M vs 1M Price Growth (NBS) (Monthly Jan 2012—May 2017)

Source: Analysis by Real Estate Foresight based on data from NBS, Datastream

100s of Cities Bubble Up & Down As Policy Makers Press the Levers China hasn’t collapsed. And, the bubble hasn’t burst because there may not be just one big real estate bubble. Instead, there are 100s of sizable cities, each moving in its own cycle, each responding to how its local policymakers stimulate & tighten-stimulate & tighten, and each having performance divergent from that of other cities. Watch here to see how city-level markets bubble up and bubble down...

12M vs 1M Price Growth (NBS) (Monthly Jan 2012—May 2017)

Shanghai Price Movements

Source: Analysis by Real Estate Foresight based on data from NBS

Keep Reading
Close
TOP

ALL ANALYSES BY