China’s top-tier cities post continued growth

2016 has been quite the year for China’s property sector. With property booms in top-tier cities such as Beijing, Shanghai and Shenzhen, overall investment in the country’s real estate rose by 6.9% last year.

chinaSince the property sector is one of China’s main sources of economic growth, and her economy did grow by 6.7% last year, fuelling 40 other main business sectors in the country, economists, the China government would no doubt hope for continued success this year. But there have been concerns that the pressure on the property bubble is building up and might be reaching bursting point.

Despite the government’s attempts to cool the market with rapid and frequent policy changes over the past couple of years, property investment growth has hit a 11.1 per cent high last December, up from the 5.7 per cent in the month before. Though home prices in some cities have began to fall slightly, analysts are seeing that market sentiments are hardly sensitive to policy shifts. Should the policies stick, any significant changes will only come with time. As most investors consider property-ownership the most feasible and desirable means of adding to their income, demand in top-tier cities remain high despite soft price growth.

GuosonCentreRecent shifts on the international front however may mean continued growth in the real estate market within China as more investors look inward, what with the Trump administration turning things on its head with his trade agreements changes. It may be in the government’s interest to acquire land revenue while keeping an eye on a burgeoning real estate sector which on the plus side will boost economic growth but may cause bigger issues later on if allowed to continue on its upward trajectory.

Property prices in China continue to climb

Earlier in the year, China’s government laid down new regulations in an attempt to avert a property bubble, but if last month’s 33 per cent year-on-year increase in home value is anything to go by, they may have to do a whole lot more to prevent the real estate industry from travelling dangerously down the path of no return.

chinaProperty prices rose 1.2 per cent in August in 70 Chinese cities, not only in major cities such as Shanghai and Shenzhen but also in regional cities. Last year, the Chinese government relaxed rules on foreigners purchasing properties in China, and despite a slowing economy, property prices have continued to rise. Unrealistically? Perhaps. In Shanghai and Beijing alone, prices have risen 4.4 and 3.6 per cent respectively. In Shenzhen and Guangzhou, home values rose as well at 2.1 and 2.4 per cent respectively. Previously, only the first and second-tier cities had to grapple with sky-rocketing property prices, but the effect may have trickled down to cities of various tiers.

Property analysts are certain however, that as long as land supply remains stagnant and loans are fairly easily attained, the rise will continue. Previous curbs have yet to made a significant impact on the industry and as long as supply remains lower than demand, property prices will continue to climb.

New residential property in Hebei

Though the spotlight on some second and third-tier cities have dimmed, some bright sparks remain. Take the 533.3 ha Sino-Singapore Health City in Gaobeidian for example.

GaoBeidian1Photo credit: KSH Holdings

A Singapore-listed real estate and development company, KSH Holdings, has announced plans to launch a 3,050-unit residential project within the Hebei province by the end of 2016 together with their joint-venture partners, Beijing Jia Hua Hong Yuan Investment, Oxley Holdings, Lian Beng Group, Heeton Holdings and Zap Piling.

They continue to see potential for growth and demand for commercial and residential property development, especially as the infrastructure and shift in economics are favouring this particular township. With the high-speed train, Gaobeidian will only be a 20-min train ride away from Beijing. And with the food logistics centre moving to the city, the township is set to be an important hinterland.

GaoBeiDIanPhoto credit: KSH Holdings

The potential residential project launch will see up to 1,600 mass-market units priced between 4,000 to 5,000 yuan per sq m and 1,450 higher-end units priced between 7,000 to 8,000 yuan per sq m. And this is only a fifth of the 18,000 new homes the township will eventually yield in phase 1. The second phase will potentially yield up to 30,000 new residential units. The Gaobeidian development will also include a 40,000 sq m commercial site, a food-safety testing centre and even a mountain-climbing training centre.