Country Guides Country Guide: China

Date Published:

18/11/2009

In the world’s most populous country, which is also one of its largest and most geographically diverse, the ‘property market’ is similarly hugely disparate. Could you buy there?

Gordon Miller

Due to its size, what goes in one corner of China doesn’t in another but, that said, there’s only a handful of locations that you, as a foreigner, are likely to be looking at unless you work in or have relations in China. Moreover, only foreigners who have worked or studied in China for at least a year are allowed to buy a home.

Although a relaxation in foreign investment criteria is said to be afoot. James Gonzalez, market analyst at Obelisk Investment Property, says that there is general agreement within the industry that a package of proposed measures can only have a positive effect on the Chinese real estate sector. ‘However, there is a long way to go and if the restrictions on foreign investment are lifted, then China will certainly be a market to watch.’

Following several years of double digit GDP growth, the economy fell back last year, following the Beijing Olympics. The slowdown was reflected in the property market. GlobalPropertyGuide.com reported, ‘The housing slowdown began in the first half of 2008 with developers offering discounts ranging from 20 per cent to 30 per cent. Transactions are significantly down. Price falls of around 10 per cent to 30 per cent are expected in several major cities, as lending dries up while the economy cools down.’

But in a land where the economy rarely pauses for breath, analysts BNP Paribas and the China Real Estate Chamber of Commerce (CRECC) are confident that property prices are unlikely to fall further as increased money supply and credit expansion inflate asset prices. Nie Meisheng, CRECC president, said: ‘Residential prices will be the first to rebound, driven by urbanization, followed by commercial property such as shopping centres.’

Bloomberg reports China’s property market is rebounding, allaying concern that a potential collapse could undermine the nation’s economic recovery. Sales rose 45.3 per cent in the first five months to 1 trillion yuan ($146 billion) from a year earlier. That compares with a 19.5 per cent decline for all of 2008. Falling house prices, record new loans of 5.17 trillion yuan in the first four months of the year and lower interest rates helped spur the comeback.

As recently as December, Macquarie Securities forecast that construction may contract in 2009 by 30 per cent and Credit Suisse Group AG warned that a collapsing property market could drag economic growth to zero. Now that position looks wildly pessimistic. Paul Cavey, an economist with Macquarie Securities in Hong Kong, said: ‘Our confidence in a second-half economic recovery is based on the strength of property transactions.’ He now forecasts a 10-15 per cent increase in construction.