Natural person investors in the mainland stock markets are mainly white-collar workers or mid-level management staff in enterprises who were born in the 1980s. Those people, at the same time, have a strong desire to buy homes after cashing in their gains in the equity market. Tomohiro Ohsumi / Bloomberg

Cash-rich mainland investors switch to top-end properties on worries that shares bull run may be losing steam

Increasing risk perception in the stock market has unleashed capital that is driving up the property market in Beijing, experts believe.

A report released by Yahao Real Estate Selling & Consulting Solution Agency on June 10 showed that in the first five months of the year, 108 units of high-end homes were sold in Beijing. Working out to nearly 22 per month, it was the highest monthly transaction volume posted since 2006 for such homes, priced at around 100,000 yuan ($16,105) per square meter.

"Capital flowing out of the stock market is the major driver for the rise in commercial real estate transactions in Beijing," said Guo Yi, marketing director at Yahao.

"Risks are building up as the Shanghai (Composite Index) market has risen from (a low of) 1,600 (in March 2014) to around 5,000. It is a good time for speculative capital to leave the market, with the housing market appealing to speculators because they expect stable increase in value. The housing market in Beijing, though unlikely to soar as much as stocks, holds a stable and bright future."

Latest data on investor accounts released by China Securities Depository and Clearing Corp Ltd shows the number of A-share accounts with more than 10 million yuan held by natural persons stood at a record high of 59,000 in late March, from being slightly above 30,000 in September 2014 - or nearly doubling within six months.

"Stock buyers who reaped huge profits from the soaring shares will likely sell when the index hits the peak," Ren Zhiqian, former president of Huayuan Real Estate Group, told National Business Daily. "It's highly possible they will buy property with the profits. A large amount of capital will probably flow from the stock market to real estate in the fourth quarter."

Yan Yuejin, analyst at real estate consultants E-house China, said the increasing transaction volume in the housing market indicates strong public willingness to buy homes.

"In the wake of the stocks slump of May 28, it is expected that some stock holders will retreat from the market and invest in real estate. In June, the transaction volume is expected to remain high, particularly in large cities," said Yan.

On May 28, the Shanghai Stock Exchange (SSE) Composite Index dropped by 321 points, or 6.5 percent, to close at 4,620. That followed a marked rise of 15.4 percent, or 658 points, in the less than two weeks between May 15 and May 27.

Meanwhile, a financial investor is reported to have bought as many as 30 apartments for a total of 60 million yuan at ID City, a residential complex in the north of Beijing, according to the Beijing Times.

The buyer is said to have cashed in part of his stock holdings to invest in the housing market when the Shanghai Composite Index crossed 4,500 on May 21 and kept going, the report said.

And stock buyers are getting younger. According to China Securities Depository and Clearing Corp Ltd, those born in the 1980s accounted for 62 percent, or nearly two-thirds, of the 7.95 million new stock buyers in the first quarter. More than 90 percent of the accounts hold stocks lower than 500,000 yuan in market value.

At the end of 2013, around 11.6 percent of investors on the SSE were under the age of 30. By the end of last year, their number soared to 37.7 percent.

Homes buyers are getting younger too. According to the market research center of Beijing-based real estate agency 5i5j.com, 1970s-born people made up more than half, or 52.4 percent, of second-hand homes buyers transacting through them in the year 2006. But now, it is 1980s-born people who make up the majority of the agency's second-hand home buyers, at 54.4 percent.

"People who use their stock-market profits to buy property are mainly planning to live in these homes instead of using them for investment," said Song Hui, an analyzer at 5i5j.com

"Going by the structure of stock investors, natural person investors are mainly white-collar workers or mid-level management staff in enterprises. People born in the 1980s make up a large proportion. They have a strong need to buy homes so they can get married, educate their children in good schools in the neighborhood, and accommodate and take care of aging parents. Some of them may be buying a home for the first time and others may be looking to upgrade."

"These people don't have so much capital. Most of them see stocks as part of their investment portfolio. Not many do it full time. Starting from October last year when stocks began to show signs of a bull market, capital flowed from real estate to stocks. This year, capital is likely to make a comeback to the housing market," Song forecast.

yangziman@chinadaily.com.cn

(HK Edition 06/16/2015 page10)