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Realty heading for market consolidation

By Emma Dai in Hong Kong (China Daily) Updated: 2014-07-12 06:53

Merrill Lynch's Ngai is even more optimistic. "We expect market sentiment to pick up in the second half," he said. "Sales volume is set to improve because developers will launch more new projects and offer even bigger discounts.

"On the supply side, new construction volume has come down and developers have be more conservative in land purchases. With price drops, we expect demand to pick up. The market is likely to find the balance again at the end of the year or early next year," he said.

Real estate investment has increased 15 percent this year, much slower compared with 2013. New construction volume also dropped by 19 percent for commodity housing and down by 22 percent for the residential sector.

Besides, Ngai stressed that demand for housing is solid in China. "People are not buying because currently the sentiment is not good. Potential buyers are waiting for further discounts. Major cities recorded 20 to 30 percent drops in sales volume in the first half. With demand piling up, we expect the pressure to ease in the second half on lower home prices and friendly policies."

According to Centaline Property's data, in six major mainland cities, the amount of enquiries to the real estate agency didn't drop this year compared with 2013. Meanwhile, though mortgages are said to be hard to acquire this year, Ngai said loan supply is at around the same level compared with last year, only at a higher interest rate.

He added that while the countries' urbanization rate is at 53 percent, the official plan is to boost the rate to 60 percent by end of the decade, which will generate a large amount of home seekers in cities.

Besides, a lot of residential properties in big cities were built before the housing reform in 1998. "They are in poor condition now. Many people are looking to upgrade their living standards when their incomes grow. Nationwide, affordability is improving, because overall household income growth has outpaced home price growth. The affordability is stretched only in first-tier cities."

Realty heading for market consolidation

Realty heading for market consolidation

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