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REAL ESTATE: China's 2013 Off to a Strong Start as Pessimism Wanes
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Index Changes
The 70-city CBRE China National Commodity Housing Price Index* for January recorded an 8th consecutive month on month increase of 0.9 points, pushing the index to 145.8 and achieving a new historical high. Of the 70 cities surveyed, the number of cities that recorded a month on month price increase slightly edged down to 53, compared to 54 last month. 10 cities recorded a month-on-month price decrease, compared to 8 last month.  alt
 
Transacted Volume  
Commodity housing month on month sales volume, in terms of both transacted units and transacted areas, among the 15 cities tracked by CBRE reversed their upward trends fell by 14.1% and 13.9% respectively in January. Cities with strong sales performances in December 2012, such as Chongqing and Qingdao, experienced more contraction during this month. However, transacted units in Shenzhen rose by 36% month on month against the market trend and reached a new peak since the implementation of residential market control policies in October 2010.
 
Macro Outlook  
altLatest economic indicators continue to show positive signs of China’s economy to stabilising during 2013. HSBC China PMI climbed up to 54.0, from 51.7 in December, the highest level in 4 months. Producer Price Index (PPI) further narrowed to 1.6% year on year compared with 1.9% decrease in December. The new CNY loan amount in January increased by 45% year on year to CNY 1.07 trillion, the highest in the last 13 months, signalling the government’s intention to stabilise economic growth by expanding its monetary lending. Meanwhile, because of growing concerns over quantitative easing monetary policies for overseas capital markets, China’s central bank has stressed its intention to fend off inflationary pressure and asset bubbles in the recent monetary policy implementation report. Curbing real estate speculation and taking actions to rein in the property market was also reaffirmed in China’s State Council meeting on 20 February. It is very possible that the government will introduce further tightening measures in the near future if prices continue to grow and begin inflating. 
 
Tier Level Price Changes  
Residential prices continued to move up across China with tier-1 city index increasing at the fastest pace of 2.0 pts to 139.1, tier-2 city index moving up 0.8 pts to 141.2, and tier-3 city index edging up 0.5 pts to 152.9. Both tier-1 and tier-3 city indices achieved new historical highs. The previous high for tier-2 city index was 142.6 (August 2011). 
 
Robust Tier-1 Cities Sales Momentum 
During January, 3-month moving average sales volume among three of the four tier-1 cities reached 9,075 units, a 2-year high and 8.4% month-on-month. 9 of the CBRE tracked-tier-2 cities’ 3-month moving average sales volume also grew albeit at a much slower pace than tier-1 cities, 4.3% month-on-month. The imbalance among tier-2 cities can be observed, ranging from 18.7% month on month sales growth in Ningbo to a -3.7% rate in Dalian.
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Land Market Surge Reflecting Developer’s Confidence 
During the same month, average residential land accommodation prices amongst tier-1 cities rebounded to CNY 8,866 per square metre, the highest in the past 12 months. Beijing took the lead at CNY 11,192 per square metre. Meanwhile, tier-2 city land transactions, in terms of both GFA and price, remained relatively stable in January, with ebb in prices to CNY 1,770 per square metre, a 3.6% month on month decrease. As housing sales volumes continue to pick up, developers’ confidence in the market has grown to become cautiously optimistic- especially among the most active residential markets. This was reflected in the increase of land price premium. Among tier-1 cities, land premium averaged 44% during January, the highest in the past 12 months. 
 
“New” Five State-level Measures Aimed at Curbing Residential Property Market Speculation
Property price controls will be maintained, Premier Wen Jiabao vowed in a meeting of the State Council on 20 February, 2013, in response to a rebound in the real estate market in some cities. Detailed measures were released on 1 March, 2013.
 
The new measures, known as the Five State-level Measures, not only reiterate its adherence to the existing regulations, but also present some new moves- especially the re-introduction of the individual income tax regarding property re-sale, which triggered a stampede by home sellers and agents to register their sales with government agencies before the tax becomes effective. Though the new measures are not as strict as some experts predicted, it is clearly a signal showing that the government will not loosen up on its regulation. 
 
There are six major items in the notice released by the General Office of the State Council on the first day of March, and some key points are as follows:
 
Firstly, the regional governments should improve their responsibility system for stabilising property prices. The provincial governments should take charge and the city governments should strictly implement the regulations. Major cities should set annual new residential housing price targets and release it to the public in the first quarter of the year. 
 
Secondly, the government is determined to curb speculation in the housing market. It will continue to strictly implement and improve the existing restrictions on home purchases. In cities with excessively fast price growth rates, the banks could further increase the down payment and mortgage interest rate on second-home purchases. A 20% individual income tax should be levied on citizens when they sell their properties. The government will expand its property tax experiment to a larger scale.
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Thirdly, the regional governments should increase the supply of commodity housing and land. In principle, the land supply of residential property in 2013 should be no less than the average of the last five years. 
 
Fourth, the regional governments should speed up the planning and construction of affordable housing. The government should meet the national target of 2013, by completing the construction of 4.7 million units and launching 6.3 million new units of such housing.
 
Fifth, the government will strengthen market regulations and expectation management. The government will work on improving the pre-sale system and establishing the housing information system.
 
Lastly, the government will work on establishing long term mechanism to ensure a healthy development of the real estate market. 


 

By CBRE
 
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