Sales surge in Beijing but analysts still cautious
Yvonne Liu 25 March 2009
The weather is warming up in Beijing but it will be a while before the same can be said with any confidence for the property market in the capital.
True enough, January and February sales volumes were encouraging after a gloomy year in which the number of transactions dropped 40 per cent.
But the devil remains in the details, analysts say.
According to data collated by consultancy DTZ, total sales in Beijing’s primary market rose 27.5 per cent in the two months of January and February, compared with the same period last year.
On a monthly measure, deal volumes were 9.7 per cent higher than average monthly sales last year.
Weekly sales data showed transactions were back at peak levels in 2007, said Li Wenjie, a general manager at Centaline (China) in Beijing.
According to the firm, 500 to 600 deals were done per day in the capital in the primary and secondary markets over the past few weeks, which was on par with levels in 2007. Most of the buyers were end-users.
So why the cautious attitude shown by industry watchers to the good news with which the year has begun?
Alan Chiang Sheung-lai, the head of residential property at DTZ in China, said the otherwise positive data masked lingering negative signs. The most obvious was price and DTZ data, which show that in January, the average price at which those new deals were taking place was 20 per cent lower than a year ago.
In February, the price gap on last year’s levels narrowed to 14 per cent, but despite the jump in sales, prices were slow to reach the bottom.
And then in March, the encouraging growth in deals also reversed and Mr. Chiang now expects prices to follow suit, only bottoming out some time after the middle of this year.
It was inevitable, said Mr. Chiang, that the surge in sales in the first two months of the year could not be sustained.
Many buyers had delayed their purchase plans and a backlog of demand had built up that was released when it appeared that no further relief measures were likely from the government.
Now a clearer picture had emerged and the market was likely to turn quiet again until further significant shifts occurred in prices or sentiment, Mr. Li said. “The market is still suffering from a problem of oversupply and the expansion of budget homes.”
He Jiangchuan, the chairman of Beijing North Star, the property arm of the Beijing local government, said last week the rebound in transactions in Beijing over the past few months was to be expected after a prolonged downturn.
“It doesn’t mean the property market has recovered,” Mr. He said, adding that the release this year of millions of square metres of budget housing would put downward pressure on prices of private housing in suburban areas of the city.
“The government will allow developers to raise prices of budget housing as their profit margin on the units is low,” he said.
But while this would narrow the price gap between budget housing and private housing in suburban areas, pressure would remain on private sector prices.
Based on current wage and price settings, according to Beijing North Star, a Beijing resident would have to save his or her entire salary for 14 years in order to be able to buy a house - compared with a nationwide average of house prices that are equal to 6.9 times salary. This is because the take-off of property prices began earlier in Beijing and speculation was more intense. As a result, price declines now would also be greater, Mr. He said.
To stimulate the market, he suggested the government offer subsidies to lower-income earners.
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Sales surge in Beijing but analysts still cautious
Yvonne Liu
25 March 2009
The weather is warming up in Beijing but it will be a while before the same can be said with any confidence for the property market in the capital.
True enough, January and February sales volumes were encouraging after a gloomy year in which the number of transactions dropped 40 per cent.
But the devil remains in the details, analysts say.
According to data collated by consultancy DTZ, total sales in Beijing’s primary market rose 27.5 per cent in the two months of January and February, compared with the same period last year.
On a monthly measure, deal volumes were 9.7 per cent higher than average monthly sales last year.
Weekly sales data showed transactions were back at peak levels in 2007, said Li Wenjie, a general manager at Centaline (China) in Beijing.
According to the firm, 500 to 600 deals were done per day in the capital in the primary and secondary markets over the past few weeks, which was on par with levels in 2007. Most of the buyers were end-users.
So why the cautious attitude shown by industry watchers to the good news with which the year has begun?
Alan Chiang Sheung-lai, the head of residential property at DTZ in China, said the otherwise positive data masked lingering negative signs. The most obvious was price and DTZ data, which show that in January, the average price at which those new deals were taking place was 20 per cent lower than a year ago.
In February, the price gap on last year’s levels narrowed to 14 per cent, but despite the jump in sales, prices were slow to reach the bottom.
And then in March, the encouraging growth in deals also reversed and Mr. Chiang now expects prices to follow suit, only bottoming out some time after the middle of this year.
It was inevitable, said Mr. Chiang, that the surge in sales in the first two months of the year could not be sustained.
Many buyers had delayed their purchase plans and a backlog of demand had built up that was released when it appeared that no further relief measures were likely from the government.
Now a clearer picture had emerged and the market was likely to turn quiet again until further significant shifts occurred in prices or sentiment, Mr. Li said. “The market is still suffering from a problem of oversupply and the expansion of budget homes.”
He Jiangchuan, the chairman of Beijing North Star, the property arm of the Beijing local government, said last week the rebound in transactions in Beijing over the past few months was to be expected after a prolonged downturn.
“It doesn’t mean the property market has recovered,” Mr. He said, adding that the release this year of millions of square metres of budget housing would put downward pressure on prices of private housing in suburban areas of the city.
“The government will allow developers to raise prices of budget housing as their profit margin on the units is low,” he said.
But while this would narrow the price gap between budget housing and private housing in suburban areas, pressure would remain on private sector prices.
Based on current wage and price settings, according to Beijing North Star, a Beijing resident would have to save his or her entire salary for 14 years in order to be able to buy a house - compared with a nationwide average of house prices that are equal to 6.9 times salary. This is because the take-off of property prices began earlier in Beijing and speculation was more intense. As a result, price declines now would also be greater, Mr. He said.
To stimulate the market, he suggested the government offer subsidies to lower-income earners.
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