Friday, May 20, 2022

China’s home prices expected to grow faster than anticipated

home prices

Average residential property price growth is estimated to be 5% this year

China’s home prices are expected to grow faster this year than anticipated a few months earlier fuelled by strong demand in major cities and easy liquidity, despite Beijing’s heightened cooling measures, a Reuters poll showed.

As China’s economy recovers from the pandemic, authorities have stepped up curbs on the property sector to guard against financial risks as concerns mount over speculative behaviour in some parts of the market. Home prices, however, extended a rising streak in recent months with some smaller towns from metropolises following suit.

Average residential property price growth is estimated to be 5% in 2021, according to analysts and economists surveyed by Reuters.

The forecast topped a 3.3% gain tipped in a February survey, and slightly higher than nearly 4.9% gain in 2020. Home prices are seen slowing to 3% in the first half of 2022.

Despite stepped-up market restrictions, prices are on a rising trajectory, said Huang Yu, vice president of China Index Academy, a Beijing-based property research institute. Climbing land prices are also expected to buoy housing prices, she said.

Zhao Ke, analyst at China Merchants Securities, said muted prices in tier-3 and 4 cities were likely to drag down overall gains.

Property sales volume is expected to be flat from last year, unchanged from the previous poll, and versus a 2.6% gain in 2020.

Housing investments are estimated to increase 7% this year, in line with the pace in 2020, and marginally higher than 6.4% in the February poll.

We expect new construction investment to revive in the third quarter on fast work resumption and rising raw material prices, China Merchants Securities’ Zhao said.

Home project construction investment will be the major pillar of overall property investment, which will also be likely driven by rental housing construction, China Index Academy’s Huang said.

Most survey respondents forecast it will take a long time before China enacts broad property tax, but some predicted some bigger cities with frothy housing markets might see pilot schemes come into force in the coming year.


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