What’s behind the projected slowdown in China’s property market

A government program that subsidizes home purchases has allocated funds for 4.6M purchases this year, down 20% from 2018

National /
Feb.February 17, 2019 02:00 PM

(Credit: iStock)

In 2015, government authorities in China responded to a big drop in the Chinese stock market and other issues by reducing interest rates and lifting limits on home purchases, which boosted both property investment and the national economy.

But now, Beijing is resisting an expansion of a public program that has provided cash subsidies to help rural residents buy apartments in dozens of Chinese cities. Government officials are now wary of stimulating housing investment because it would add unwanted debt to China’s financial system.

Other factors holding down property values include a decline in the number of Chinese citizens moving from rural villages to cities, shrinking the market for newly built properties. In addition, fewer young families are looking for better homes as the Chinese population ages.

That said, the overall Chinese property market remains robust in many parts of the country. Home prices nationwide rose 10.6 percent in December from the level of December 2017. In the biggest Chinese cities, such as Beijing and Shanghai, home sales probably will remain strong due to their employment growth, so long as China can avoid a major economic recession.

But according to some economists, home sales in big Chinese cities are surging temporarily because developers have priced them aggressively due to expectations of a worse housing market next year.

Economists also say the outlook for property sales is declining in smaller Chinese cities as their population grows slowly or shrinks.

According to research by S&P Global Ratings, smaller cities accounted for almost two-thirds of all property sales throughout China last year, up from half of property sales in 2016.

Much of the credit for that trend went to the cash subsidy program to help rural residents buy units in new apartment buildings. Under the terms of the program, smaller cities borrowed from state banks to demolish blighted housing and to grant money to residents to purchase newer homes. But how those debts will be repaid is unclear, economists say.

This year, the program has allocated subsidies for 4.6 million home purchases, down more than 20 percent from the number in 2018. [Wall Street Journal] – Mike Seemuth


Related Articles

arrow_forward_ios
From left: Jim Cohen, Nancy Corey, Nathan Zeder, Alicia Cervera Lamadrid, Phil Gutman and Mike Pappas (iStock)

South Florida’s pandemic-fueled residential market poised for bull run in 2021

South Florida’s pandemic-fueled residential market poised for bull run in 2021
Kathleen DuRoss Ford and 300 North Lake Way (Getty, Google Maps)

Kate Ford’s Palm Beach estate sells for $55M

Kate Ford’s Palm Beach estate sells for $55M
Oprah Winfrey and (inset) Lawrence Stroll over the unit (Getty)

You get a condo! Billionaire Lawrence Stroll sells Oprah’s former Fisher Island penthouse

You get a condo! Billionaire Lawrence Stroll sells Oprah’s former Fisher Island penthouse
Donald Trump (Credit: Win McNamee/Getty Images)

Newly uncovered trademarks show Trump’s Cuba real estate aspirations

Newly uncovered trademarks show Trump’s Cuba real estate aspirations
Gables Town Colony apartment complex, Sue Ansel of Gables Residential

Gables Residential scores $85M loan for Boca Raton apartment complex

Gables Residential scores $85M loan for Boca Raton apartment complex
Broadstone City Center with Alliance Residential’s Bruce Ward and Nuveen CEO Jose Minaya

Nuveen pays $103M for West Palm luxury apartments

Nuveen pays $103M for West Palm luxury apartments
Edmund Ansin and the property (Credit: Google Maps)

Billionaire TV family sells Miramar property to Florida Crystals

Billionaire TV family sells Miramar property to Florida Crystals
Toscana apartments and Juan Porro of FCI Residential

Florida Crystals sells Margate rentals for $60M

Florida Crystals sells Margate rentals for $60M
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...