China Property Market

[BlueKelah]

Not gonna help as from what I saw on the videos on china's ghost cities, up to 1/3 of any new project is sold to developers themselves and 1/3 given to the corrupt officials/relatives indirectly, public only gets 1/3

Now without the 1/3 officials out of the picture, the supply is suddenly doubled. And with developers becoming insolvent, supply is suddenly tripled for general public.

Not gonna end well and there's nothing to help China, especially now that the rest of the world is not doing that great either.

[ValueBeliever]

Today WSJ report is terrible on China developer going all out to secure loan at rates as high as 40 -50% in cities away from Beijing/Shanghai. Desperate measures to secure cash by developers are putting many out of business with repercussion on all housing related industries.

Some developers had stop construction and abscond buyer's fund.

No wonder commodities are so badly hit.

Good luck to Capital Land investment in China. Likely to burn a big hole.

[cfa]

When those badly managed weak developers are gone , good to well managed developers.

[greengiraffe]

China challenged by deepening property slump
DOW JONES OCTOBER 21, 2014 12:45PM

HANDAN, China-The property slump is worsening across China, hitting many households and industries, scaring off home buyers and lenders, and leading to bankrupt developers and abandoned projects.

Adding to the turmoil, some developers are fleecing investors with scams, while legitimate firms are increasingly stretched for cash, leading to lending rates approaching 50 per cent in some cities.

In the industrial city of Handan, 250 miles southwest of Beijing, officials are trying to recover US$1.5 billion that they say developers raised illegally, largely from individual investors who laid out money based on promises of fat returns.

“My family and my in-laws are so worried about not being able to recover the money, which was originally meant for my husband and me to buy our own home,” said 35-year-old Cathy Wang, who lent 500,000 yuan (US$81,380) to a developer who promised to repay the loan at an annualized interest rate of 30 per cent.

Agile Property Holdings Ltd. , a midsize developer, is seeking to extend a December deadline to pay US$475 million in loans. Smaller developers in cities such as Baotou in the north and Ningbo and Wenzhou in the east have closed their doors, leaving some projects half-finished.

Average new-home prices in China fell in September for the fifth month in a row, with the pace of month-to-month declines accelerating last month.

Some economists worry that a worsening slump could affect the financial system, although China, with more than US$3.8 trillion in foreign-exchange reserves, could avert a full-fledged credit crisis.

At the same time, it isn’t clear how much of the financial system is exposed to property-sector weakness because many developers rely on non-bank sources for funding-everything from big investment vehicles to individual speculators. Trusts, a type of Chinese investment vehicle and a major lending source, have a total of 1.262 trillion yuan (about US$205 billion) in outstanding loans to the property sector so far this year, up more than 50 per cent from the year-earlier period.

Following the global financial crisis, a housing boom helped China recover quickly, but it led to unsustainable gains in home prices, rising leverage among developers and ballooning inventory. In 2010, Beijing started rolling out measures such as curbs on bank loans to property developers as part of efforts to rein in speculation and to steer the economy away from being overly reliant on investment.

This year, housing sales, prices and construction activity have declined sharply, as a chronic glut of homes and expectations of further falls in prices keep buyers on the sidelines.

So far Beijing has shown little interest in dramatic remedies to help the property market, such as compelling banks to lend to developers. The government in recent weeks made its most decisive move yet by allowing existing homeowners to qualify for the preferential rates and terms enjoyed by first-time buyers. But economists say its efforts so far have shown little impact.

China on Tuesday will report its third-quarter economic-growth figure. Economists widely believe it will slow to 7.2 per cent from 7.5 per cent in the second quarter, according to a Wall Street Journal survey, putting China in jeopardy of missing its annual growth target-set at 7.5 per cent for 2014-for the first time since the Asian financial crisis of 1998. That is in large part because of the property market. In a monthly survey of home prices of 100 Chinese cities, 79 showed a decline in September from August, compared with 32 in last December from November.

“The linchpin of China’s economy is the housing market,” said Alastair Chan, an economist at Moody’s Analytics, who called housing the “key downside risk” to the Chinese economy.

The slowdown is rippling through different corners of the economy. Domestic steel prices are falling-steel rebar is down 15.8 per cent since the start of the year-and Chinese steel producers are exporting more to compensate for weakness at home. Cement prices have dropped 9 per cent since the start of the year.

Construction-equipment maker Zoomlion Heavy Industry Science & Technology Co. said on Oct. 15 that it expects a 65 per cent to 75 per cent decrease in net income in the first nine months this year due to slowing growth in fixed-asset investment, “especially the slowdown in the growth of real-estate investment.”

Meanwhile, lenders are limiting their exposure to the market, worsening the pain. “We’re more cautious in our debt financing to developers and our criteria have gotten tougher this year,” said David Long, president of the investment unit in Grand China Fund, a Beijing-based private-equity fund. His fund now extends loans only to real-estate firms in more-developed cities and looks for borrowers with revenue sources apart from real estate.

“If we loan out one yuan, it needs to be backed by two yuan worth of collateral,” said Mr. Long.

[cfa]

New home sales hit high since April
By Cherry Cao | October 21, 2014, Tuesday | Print Edition

NEW home purchases in Shanghai rose to the highest in over six months last week as sentiment among home seekers and real estate developers rose again, latest industry data showed.

Sales of new homes, excluding government-funded affordable housing, climbed 2.3 percent week on week to 279,500 square meters, extending the pace for the second straight week, Shanghai Deovolente Realty Co said in a report released yesterday.

New home supply surged 55.2 percent from the previous week to 365,300 square meters during the same period, according to Deovolente data.

“Amid rather ample supply over the past two weeks, seven-day transactions of new houses soared to the highest since April, indicating improved momentum among home seekers as October, one of the few months when property sales are robust, is coming to an end,” said Lu Qilin, a Deovolente researcher. “We therefore expect notably better sales this month compared to September.”

The new homes were sold for an average 28,366 yuan (US$4,627) per square meter, up 7.7 percent from the previous week. A total of 132 luxury units, priced at 50,000 yuan per square meter and above, were sold across the city, up five from the previous week, the data showed.

Meanwhile, as of yesterday, over 12.5 million square meters of new homes were available for sale in Shanghai, according to the city’s official real estate website Fang.com.

Huang Zhijian, chief analyst at Shanghai Uwin Real Estate Information Services Co, expects developers to continue to provide discounts to unload their inventory.

http://www.shanghaidaily.com/business/real-estate/New-home-sales-hit-high-since-April/shdaily.shtml

[greengiraffe]

http://www.cnbc.com/id/102112727?trknav=...topnews:20

Why China's property slowdown isn't so scary: Goldman
Ansuya Harjani | @Ansuya_H
17 Hours Ago


Photolibrary | Getty Images
China's property market looks to be on shaky ground with home sales flagging and prices declining, but Goldman Sachs isn't fretting about a sharp downturn in the sector.

"Our bottom line is that the Chinese housing market has some clear signs of 'froth'," Andrew Tilton and Hui Shan, economists at the bank, wrote in note. "But with several sources of pent-up demand, policymakers have a broad array of tools to deploy (and have even started to deploy some) to help support the housing market," they said.

The bubble in the housing market has been generated more from the supply side – overbuilding by developers— rather than the demand side whereby households leverage up to purchase beyond their means, Tilton and Shan said.

Read MoreChina home prices fall for fourth straight month

This means there is still scope to stimulate demand should policymakers desire to do so, they said, noting that rapidly-rising incomes and continued urbanization ensure a large pool of potential buyers in the country.

"Chinese policymakers are attentive to the risks and can avail themselves of a particularly broad array of tools to smooth the adjustment path and limit risks," they said.

Plenty of policy tools

In late-September, policymakers took bold steps to prop up the housing market, allowing a broader range of home buyers access to lower down payments and mortgage rates.

Read MoreChina relaxes mortgage rules for second home buyers

There's further scope to ease mortgage lending conditions, the bank said.
"The mortgage debt-to-GDP ratio is still low in China, so easing mortgage credit would be highly likely to increase sales, prices and construction activity, with minimal incremental financial stability risk," it said.

Alternatively, the government could provide liquidity to distressed developers or even purchasing inventory directly in order to prevent them from cutting price aggressively to liquidity inventories.
However, the bank acknowledges that managing the property slowdown won't be an easy task.


"Policy must be restrictive enough to rein in shadow banking activity and limit future excesses in construction. But it must be loose enough to support demand and avoid a sharp credit crunch that could lead to liquidation of housing inventory and large price declines," Tilton and Shan said.
"Compared with the previous two housing slowdowns in 2008-09 and 2011-12, debt is higher and growth is slower, so policymakers face more constraints today in designing and implementing effective policy changes to steer the housing market away from an eventual hard landing," they added.

The housing sector – which is linked to some 40 sectors in the country from cement to furniture – is regarded as the weakest link in the world's second-largest economy.
Read MoreChina GDP beats, but growth rate slowest since crisis
Growth in real estate investment slowed to 12.5 percent in the first nine months of 2014, from 13.2 percent in the first eight months, while property sales and new construction tumbled, helping to drag broader economic growth to a near six-year low in the third quarter.

"We expect the contribution of housing activity to real GDP growth to wane significantly by 2015, although it is still a net positive," Tilton and Shan said.

"Spillovers to the financial system will not have large negative consequences, because of low household leverage, the lack of complex financial products that can amplify systemic risk, and policymakers' demonstrated ability and willingness to limit the degree of credit stress on the system and to support key institutions," they said.

Near-term outlook brightening
Alvin Wong, China property analyst at Barclays, expects the government's recently announced property measures will begin to boost sales as soon as the fourth quarter.

"With the effect of the more preferential mortgage environment to kick in, including a lower down payment ratio for upgrade demand, the cheaper lending rate for first mortgages as well as more supportive housing provident fund loan policies, we believe this should bode well for the continued improvement in the sales momentum in the fourth quarter," he wrote in a note.

Read MoreChina's property rescue package: Will it work?
Different from the historical pattern of September sales generally being better than October sales – sales for the first three weeks of this October - across 30 major cities tracked by the bank - have exceeded the level recorded in the same period of September, he said.

With a better October likely, this should translate into the first year-on year increase in national property sales in 2014, he noted.

Ansuya Harjani
Ansuya Harjani
Writer, CNBC Asia

[greengiraffe]

House prices in China fall in Sept
OCTOBER 24, 2014 2:15PM

The average price of new homes in 70 Chinese cities fell year over year in September for the first time in nearly two years, as property developers continue to cut prices to lure home buyers.

The drop is yet another signal of a flagging property market, which poses one of the biggest risks to China's slowing economy.

The average price of new homes declined 1.1 per cent in September compared with a 0.5 per cent gain in August.

The reading marks the first drop since December 2012 when prices fell 0.1 per cent. On a month over month basis, prices in September continued to fall for the fifth straight month, down 1 per cent compared with a 1.1 per cent fall in August, according to calculations by The Wall Street Journal.

Many economists and investors are concerned that a worsening slump in the property market could cause a sharper-than-expected slowdown in the world's second largest economy.

Analysts estimate that real estate accounts for nearly one-quarter of gross domestic product, factoring in construction, cement, steel, chemicals, furniture and other related industries. China's economy grew 7.3 per cent in the third quarter this year, its slowest pace in five years.

Excluding public housing, private-sector home prices fell in 58 of the 70 cities in September from a year earlier, up from the 19 cities that posted declines in August. On a month-over-month basis, home prices fell in 69 of the 70 cities in September.

In recent weeks, the authorities have introduced measures to prop up the housing market. The central bank in late September loosened mortgage restrictions by extending qualification for first-time buyers' preferential rates and terms to existing homeowners.

Housing transactions have picked up in September, the start of the traditional peak season, compared with August. Analysts noted more favorable home buyer terms would likely boost sales in the coming weeks, but that those measures wouldn't quickly solve the longer-term issues of excess inventory and rising leverage.

[cfa]

I

Home » Business » Real Estate
Home prices continue to moderate in September
Source: Xinhua | October 24, 2014, Friday | Online Edition

CHINA'S home prices continued to moderate across more cities in September despite easing government restrictions on the market, official data showed on Friday.

New home prices in 69 of 70 sampled cities showed month-on-month drops in September, compared to 68 in August, the National Bureau of Statistics (NBS) said in a statement.

The only exception is the city of Xiamen, where home price remained flat from the previous month.

The latest data marked the fifth consecutive monthly drop, according to the NBS data.
New home prices in Beijing and Shanghai dropped by 0.9 percent and 1.1 percent, respectively.

For existing homes, all 70 Chinese cities saw price drops in September, with the southwestern city of Nanning registering the sharpest fall of 2 percent.

On an annual basis, home prices in 58 out of the 70 cities were lower from a year ago.

"Although home prices in the majority of cities dropped on a monthly basis, the pace of decline has narrowed," said Liu Jianwei, a senior statistician at the NBS.

Friday's data was released alongside other statistics that showed slower growth in real estate investment and property sales.

China's property investment rose 12.5 percent year on year in the first nine months of 2014, 0.7 percentage point slower from the growth in the January-August period, while property sales went down by 8.9 percent year on year during the Jan.-Sept. period, with residential property slumping 10.8 percent.

The continuing downturn in the property market, a major growth engine for the world's second largest economy, dragged down growth in the broader economy, which slowed to 7.3 percent in the third quarter.

To avoid a sharp slowdown in the property market, China on Sept. 30 unveiled eased mortgage measures for home buyers in a joint announcement by the People's Bank of China, the central bank, and the China Banking Regulatory Commission.

According to the announcement, mortgages on second homes will be treated as a first mortgage if the buyer has no other outstanding mortgages.

Before the easing of mortgage rules, 41 out of an original 46 cities removed home purchase restrictions.

Shen Jianguang, chief economist at Mizuho Securities, said although the broader-than-expected support policies would help stimulate sales, China still faces a heavy pile-up of inventories.
"Given that, the property sector's negative impact on the broader growth will last for a while," he said.

Zhang Dawei, chief analyst at real estate agent Centaline Property, agreed. He expects this round of adjustment for the property sector to last until early 2015.


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[BlueKelah]

Customers Trash Greentown Qingdao Office After 35% Off Promotion

While many of China’s potential homebuyers are waiting for deeper discounts before jumping into the market, the risks of slashing prices became evident recently when disgruntled customers stormed a sales office in the eastern China city of Qingdao earlier this month.

According to local news reports, clients who had purchased homes in the Qingdao Greentown Park project rushed to the developer’s office turning over tables, sales displays and chairs after sales representatives spread the word that units in the company’s Greentown Ideal City project would be offered at a 35 percent discount from the asking price.

The October 13th uprising by customers who assumed that prices would only go up is not the first of its kind in China, and spotlights the dilemma facing developers in a market where homebuyers are not accustomed to seeing prices go down.

China Developer Cuts Prices During Market Slump

Customers held up banners outside of Greentown’s offices protesting the change in prices

At first glance, Greentown’s decision to slash prices on phase 2 of the Ideal City project on October 11th is just what the market demanded. China’s home prices fell for a fifth straight month in September, and the average price nationwide is now estimated to be less than it was at the same time last year.

According to reports in the local media, company sales representatives called potential customers letting them know that a limited number of units in the second phase of the project would be available for 60 to 70 percent off the asking price – bringing rates down as low as RMB 7000 per square metre.

Potential buyers responded rapidly with lines forming outside the sales office. On just the first day of sales, Greentown is said to have been able to sign up more than 300 clients, with each making a deposit of at least RMB 10,000 on their contracts.
Phase I Buyers Attack After Price Cut Announced for Phase II

Read More Here

[Boon]

It happened THREE years ago (and in earlier years as well) - nothing new - it was even reported the China property had finally burst then.
________________________________________________________________________________________________________________

China Housing Market Crash, Shanghai Homeowners Smash Showroom in Protest of Falling Prices
Housing-Market / China Economy
Oct 28, 2011

By: Mike_Shedlock

The property bubble in China has finally burst. Denial has turned to anger as Shanghai Homeowners Smash Showroom in Protest Over Falling Prices

A group of around 400 homeowners in Shanghai demonstrated publicly and damaged a showroom operated by their property developer after the company said it cut prices. Home buyers had wanted to speak with the developer to refund or cancel their contracts but were unsuccessful, according to local media. One report said the price cuts exceeded 25% per square meter..............................

http://www.marketoracle.co.uk/Article31222.html