Abstract
This is the second of BMI’s reports on the real estate sector of
China.
Although the real estate dynamics vary from sector to sector and
from city to city, it appears likely that,
overall, 2009 will be the year
in which the fortunes of China’s real estate sector change for the
better.
In the first instance, it appears that the government’s
fiscal stimulus package (in reality a complex mix of
investment and
subsidies to boost consumption – especially by rural and poorer people)
appears to be
working, with the result that China’s economy will
achieve respectable growth this year. A part of the
package is systematic
promotion of construction and development of lower-cost housing.
In
general, housing prices were lower in Q109 than they had been in the previous
corresponding period –
indicating that past oversupply is still
being worked through. This is happening at a time when China’s
export sector is suffering as a result of the downturn in the global economy
and multinational companies
have been making cut backs. Nevertheless, the
trough in prices appears to be months, rather than years,
away.
The
continued growth in the economy, and the stimulus package, bodes well for the
retail sector across
China as a whole. However, the problems of the
exporters will likely continue to overshadow the
industrial sector –
particularly in the Pearl River Delta region and around Shanghai – into
2010. Office
rents in several key markets are also still falling.
Looking forward, we will continue to be focusing primarily on the key issues
that we identified in Q109
in our consideration of China’s Real
Estate/Construction Business Environment Rating (RECBER):
- The ongoing
revision of the financial system to allow more foreign banks, and thus
more
funding opportunities for developers and purchasers. There are a
number of countries where the
absence of finance is a major challenge.
This may have been the case in China through mid-tolate
2008, as banks
took a more cautious attitude in the wake of the real estate boom. Now
China’s under-extended (and very large) banks are under official
pressure to increase their loan
books.
- The lacklustre conditions in
industrial and office markets.
- Mass market residential real estate being
boosted by factors that are cyclical (such as the
stimulus package) and
structural (such as the net migration of people from rural China to the
cities.
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