As 2008 is just around the corner, we look ahead to next year's property market. Will the market cool? What are the government's major concerns? How will developers deal with increasing land costs? How to better prevent speculation?
After speaking to industry experts and analysts, we outline several potential trends:
Property prices are likely to continue growing, but at a slower pace
According to a study by the Chinese Academy of Social Sciences, Chinese property prices will continue rising as the fundamentals fueling growth will remain unchanged next year.
"Massive demand is exceeding limited supply," says Randall Hall, CEO of Savills Greater China. "But the recent rapid rise is unsustainable. I believe the market will now stabilize."
Li Wenjie, general manager of Centaline China (North China region), says factors that may influence the future trends of the property market include interest rate hikes and increased land supplies.
"The relationship between supply and demand remains the determining factor for the 2008 property market," Li says. "The slowdown in rising prices largely depends on the supply of new land."
Ensuring housing for low- and middle-income families will remain one of the government's priorities
In the just-concluded Central Economic Work Conference, government leaders urged more rapid construction of low-cost housing for urban families.
Premier Wen Jiabao said earlier this month that the construction of low-income housing would be an important indicator in evaluating local government performance.
The Central government issued circular No 24 on August 13, aiming to make homes available at low rents or provide equivalent subsidies. The plan is scheduled to meet minimum living standards in all large- and medium-sized cities by the end of this year, and then cover all low-income families in the country by 2010.
Second-tier cities remain the key focus for domestic and foreign property investors
"Though property prices in China's second-tier cities registered a big jump this year, I believe there's still plenty of growth potential, fueled by strong economic fundamentals," says Chris Brooke, president & CEO of CB Richard Ellis.
Some second-tier cities, such as Tianjin, Hangzhou and Chengdu, have been well covered, while others like Shenyang and Wuhan are becoming more popular with investors, Brooke says.
"But if property prices in those key second-tier cities grow too fast next year, real estate firms may turn to the others in the second-tier and even the third-tier," he adds.
More public listings of real estate firms are expected
As land becomes more expensive and funding from banks and foreign investors further tightens, an increasing number of Chinese property developers are considering listing plans.
Guangzhou-based Evergrande Real Estate Group, Star River, Excellence Group and Beijing-based Sunshine 100 Real Estate are all reported to be preparing for listings on the Hong Kong exchange. The group is expected to be larger next year.
Henan-based Xinyuan (China) Real Estate recently submitted an application to the New York Stock Exchange for listing. In mid-August, E-house (China) Holdings Ltd made a successful debut on New York Stock Exchange, with its shares surging 41 percent on the first day of trading, The company is the first Chinese real estate broker to list overseas.
"There may be more property firms seeking listings in other overseas stock exchanges, but the majority will still choose Hong Kong, the most convenient capital market," says Chris Brooke, president & CEO of CB Richard.
Property tax implementation will be accelerated
Sources from the State Administration of Taxation said the framework for property taxes is almost finished. The ministry, together with the Ministry of Finance, recently approved another four provinces to run pilot property tax projects, bringing the total number to 10 cities.
The inception of property taxes, experts say, will result in lower demand and falling prices.
"A tax levied on the ownership of property helps to reduce speculation," says Zhu Zhongyi, vice-chairman of China Real Estate Association.
(China Daily December 17, 2007)
