Real estate holds a special appeal to individual investors in China, and it is unlikely to be daunted by the first interest rate hike since 2007. Reining in property prices is proving a challenge for the Chinese government with investment levels up and no slowdown in development. See the following article from Property Wire for more on this.
Property prices and sales in China increased in September after four months of slower activity, indicating that government cooling measures are not having the desired effect.
China’s national property price index, which covers 70 large and medium sized cities, rose 0.5% in September from August, the National Bureau of Statistics said. It is the first month on month increase since May. Compared to a year earlier, the index was 9.1% higher in September, following the 9.3% gain in August.
Nationwide property sales in terms of floor space also rose 16.6% from a year earlier in September, the bureau said. That marked the first increase since April, when it rose 27%, and follows a 10.1% decline in August.
Property is the most popular form of private investment in China and it is becoming clear that the appetite is not weakening. Even yesterdays increase in interest rates, the first increase since 2007, is unlikely to dampen demand for real estate.
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Measures launched in April and last month are not putting people off. Analysts expect the most recent moves to help cool down property market activity in coming months. But many think prices will likely remain steady or decline only slightly, since the fundamental drivers of China’s property boom haven’t been much affected.
‘The government’s uphill battle to contain property prices will be a long lasting one,’ said Lu Ting, a Bank of America-Merrill Lynch economist.
It looks as if property buyers sat on the sidelines for only a short period after the April measures which raised the down payment on home purchases to 30% for homes bigger than 90 square meters. The government reacted again at the end of September by ordering banks to halt lending for third and subsequent home purchases, and also raised down-payment requirements for all home purchases to be at least 30% of the total price, up from about 20% previously.
‘I don’t think there will be major changes in the price trends in the coming months. While transaction volumes are unlikely to be as good as September’s, the general sense I get from property developers is that they are not under pressure to lower prices even with an increase in the supply of homes,’ said UOB Kayhian analyst Johnson Hu.
Many property developers have already secured most of their revenue for the year from earlier sales and have generally secure capital positions, analysts said.
Property developers have continued to boost construction. New building starts in September rose 44.3% from last year’’ levels and are up 63.1% so far this year. Investment in real estate development rose 36.4% to 3.35 trillion yuan in the January to September period from a year earlier, slowing from a 36.7% rise in the January to August period.
Some city authorities have introduced policies of their own. These include Shanghai, Beijing, Shenzhen and Xiamen which are restricting the number of homes a household can own.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.