Real estate in China

Real estate in China is developed and managed by public, private, and state-owned red chip enterprises. In the years leading up to the 2008 financial crisis, the real estate sector in China was growing so rapidly that the government implemented a series of policies - including raising the required downpayment for some property purchases, and five 2007 interest rate increases - due to concerns of overheating. But after the crisis hit, these policies were quickly eliminated, and in some cases tightened. Beijing also launched a massive stimulus package to boost growth, and much of the stimulus wound up flowing into the property market and driving prices upward, resulting in investors increasingly looking abroad.[1] By late 2014, the IMF warned that a real estate oversupply problem had arisen that threatened to negatively impact the economy, particularly in 2nd and 3rd tier cities.[2] As of 2015 the market was experiencing low growth and the central government had eased[3] prior measures to tighten interest rates, increase deposits and impose restrictions.[4] By early 2016, the Chinese government introduced a series of measures to increase property purchases, including lower taxes on home sales, limiting land sales for new development projects, and the third in a series of mortgage down payment reductions.[5]

History

As of 2010, China's real estate market is the largest in the world,[6][7] comprising about 20% of the Economy of China.[3]

Property bubble

The Chinese property bubble was a real estate bubble in residential and/or commercial real estate in China. The phenomenon has seen average housing prices in the country triple from 2005 to 2009, possibly driven by both government policies and Chinese cultural attitudes.[8][9]

  • Tianjin High price-to-income and price-to-rent ratios for property and the high number of unoccupied residential and commercial units have been held up as evidence of a bubble. Critics of the bubble theory point to China's relatively conservative mortgage lending standards and trends of increasing urbanization and rising incomes as proof that property prices can remain supported.

Growth of the housing bubble ended in late 2011 when housing prices began to fall,[10][11] following policies responding to complaints that members of the middle-class were unable to afford homes in large cities.[11] The deflation of the property bubble is seen as one of the primary causes for China's declining economic growth in 2012.[11]

2011 estimates by property analysts state that there are some 64 million empty properties and apartments in China and that housing development in China is massively oversupplied and overvalued, and is a bubble waiting to burst with serious consequences in the future.[12] The BBC cites Ordos in Inner Mongolia as the largest ghost town in China, full of empty shopping malls and apartment complexes.[13] A large, and largely uninhabited urban real estate development has been constructed 25 km from Dongsheng District in the Kangbashi New Area. Intended to house a million people, it remains largely uninhabited.[14][15] Intended to have 300,000 residents by 2010, government figures stated it had 28,000.[16] In Beijing, after 2001, residential rent prices have increased by 32%. However, while the overall inflation rate in China has just risen by 16% at the same time (Huang, 2003). To avoid sinking into economic downturn, in 2008, the Chinese government immediately altered China’s monetary policy from a conservative stance to a progressive attitude by means of suddenly increasing the money supply and largely relaxing credit conditions. Under such circumstances the main concern is whether this expansionary monetary policy has acted to simulate the property bubble(Chiang, 2016).


International Investment

Chinese consumers have become one of the biggest groups of investors in cross-border property. In the USA, Chinese buyers invested $28.6 billion into residential real estate in 2015, more than any other country.[17] In Australia, Chinese buyers were approved for AU$32 billion of commercial and residential real estate investment in 2015-16, the most of any country.[18] Other estimates put Chinese international real estate investment at $33 billion in commercial and residential property in 2016, up 53% from 2015.[19] Sue Jong, Chief Operating Officer of Juwai.com, said most Chinese buyers are "the average Chinese mom and pop looking to invest overseas. The large portion is the middle to upper middle class, that's interested in a good stable investment and may be thinking about emigrating or sending their kids to school there."[20]

Welfare housing system, parallel dynamics, and allegations of corruption

As of 2010, China has officially ordered an end to its welfare housing system; however, according to China Youth Daily, a parallel housing market continues to exist.[21][22] Government agencies continue to pay less than 20% of market value for real estate, and many officials purportedly misappropriate renovation and housing reform funds for personal gain.[23][24]

Companies

NameType1Headquarters2Total assets3Market cap3
Agile Property Public Zhongshan, Guangdong N/A US$4.7 billion (2010)
China Aoyuan Property Public Guangzhou, Guangdong N/A US$399 million (2010)
China Merchants Property State-owned Shenzhen, Guangdong N/A US$4.4 billion (2010)
China Overseas Land and Investment Limited State-owned Hong Kong N/A US$17.8 billion (2010)
China Properties Group Public Hong Kong N/A US$541 million (2010)
China Resources Land State-owned Hong Kong N/A US$10.7 billion (2010)
China Vanke Public Shenzhen, Guangdong N/A US$15 billion (2010)
Country Garden Public Foshan, Guangdong N/A US$5.8 billion (2010)
Evergrande Real Estate Group Public Guangzhou, Guangdong N/A US$773 million (2010)
Financial Street Holding State-owned Beijing N/A US$3.9 billion (2010)
Franshion Properties State-owned Hong Kong N/A US$2.9 billion (2010)
Glorious Property Holdings Public Shanghai N/A US$3 billion (2010)
Henderson China Holdings Ltd. N/A N/A N/A N/A
Hopson Development Public Guangzhou, Guangdong N/A US$2.5 billion (2010)
K. Wah International Public Hong Kong N/A US$901 million (2010)
KWG Property Public Guangzhou, Guangdong N/A US$1.8 billion (2010)
New World China Land Public Hong Kong N/A US$2.1 billion (2010)
Poly Property public Hong Kong N/A US$3.7 billion (2010)
Poly Real Estate public Guangzhou, Guangdong N/A US$10.6 billion (2010)
R&F Properties Public Guangzhou, Guangdong N/A US$5.2 billion (2010)
SOHO China Public Beijing US$4.7 billion (2009)[25] US$2.9 billion (2010)
Shanghai Forte Land Public Shanghai N/A US$760 million (2010)
Shimao Property Public Shanghai N/A US$6.2 billion (2010)
Shui On Land Public Shanghai N/A US$2.6 billion (2010)
Sino-Ocean Land State-owned Beijing N/A US$5.2 billion (2010)
Sunac China Public Tianjin N/A US$1.3 billion (2010)
Xinyuan Real Estate Public Beijing US$881 million (2009)[26] US$314 million (2010)[27]
Yuexiu Property State-owned Hong Kong N/A US$1.9 billion (2010)
Legend
1 Some state-owned entities are also publicly traded as red chip stocks
2 De facto location
3 United States dollars

See also

General:

References

  1. Strub, Doug (December 4, 2015). "Buying a Slice of Security: Chinese investors look to US real estate for stability, but must work within strict legal barriers". Business Now.
  2. "Real Estate Oversupply Becoming Bigger Problem For China". Forbes. Retrieved 2016-02-22.
  3. 1 2 Neil Gough (June 11, 2015). "Idle Home Builders Hold China's Economy Back". The New York Times. By some economists’ estimates, real estate and related industries account for more than 20 percent of China’s gross domestic product
  4. http://www.businessspectator.com.au/bs.nsf/Article/Dont-bet-the-house-on-China-pd20100504-54SYA?OpenDocument&src=sph
  5. "China Lowers Taxes, Blocks Land Sales in Attempt to Boost Housing Markets". Mingtiandi. Retrieved 2016-02-22.
  6. Heffernan, Shayne (3 March 2010). "China, The World's Largest Real Estate Market". Ebeling Heffernan. Archived from the original on 4 March 2010. Retrieved 18 March 2010.
  7. Packard, Simon (2010-03-03). "China Overtakes U.S. in Attracting Most Property Investment". Bloomberg. Retrieved 2010-03-18.
  8. Chovanec, Patrick (2009-06-08). "China's Real Estate Riddle". Far East Economic Review. Retrieved 13 March 2010.
  9. Medium (2015-01-04). "Shanghai Real Estate Trends 2015". Medium Inc. Retrieved 6 January 2015.
  10. Bradsher, Keith (2012-06-10). "Selling Abroad, China Eases Slump at Home". New York Times. Retrieved 11 June 2012. the popping of China’s real estate bubble over the past year depressed demand for steel, cement and other materials
  11. 1 2 3 Bradsher, Keith (2012-06-09). "Affirming Slowdown, China Reports Second Month of Scant Economic Growth". New York Times. Retrieved 11 June 2012. China’s leaders deliberately popped a real estate bubble last summer because of concerns that middle-class families had been priced out of homeownership in many cities
  12. China's Ghost Cities. Dateline SBS. Retrieved 17 August 2012.
  13. "Ordos: The biggest ghost town in China". BBC. 17 March 2012. Retrieved 17 August 2012.
  14. "Ordos, China: A Modern Ghost Town". Time. 25 March 2010. Retrieved 17 August 2012.
  15. Gus Lubin (13 June 2011). "NEW SATELLITE PICTURES OF CHINA'S GHOST CITIES". Business Insider. Retrieved 17 August 2012.
  16. Barboza, David (19 October 2012). "A New Chinese City, With Everything but People". New York Times.
  17. "Profile of International Activity in U.S. Residential Real Estate". nar.realtor. National Association of Realtors. Retrieved 11 May 2017.
  18. Tan, Su-Lin. "Chinese investment in real estate grows to $32b: FIRB". afr.com. Australian Financial Review. Retrieved 11 May 2017.
  19. Sheng, Ellen. "Chinese Investment In Overseas Real Estate Hit Record High In 2016". Forbes.com. Forbes. Retrieved 11 May 2017.
  20. Vaswani, Karishma. "Brexit not deterring Asian investors from UK property market". bbc.com. BBC. Retrieved 11 May 2017.
  21. Bishop, Bill (30 April 2010). "China State Media On Corruption And Cooling Off The Real Estate Market". Sinocism. Archived from the original on 31 August 2010. Retrieved 3 May 2010.
  22. Custer, Charlie (29 April 2010). "State Media Blames Housing Crisis on Corrupt Government". ChinaGeeks. Archived from the original on 3 September 2014. Retrieved 3 September 2014.
  23. Bishop, Bill (2010-05-02). "Corruption In Chinese Real Estate". Sinocism. Forbes. Retrieved 2010-05-03.
  24. Yuhang, Xie (2010-04-02). 解百姓住房难必先除权力自肥. China Youth Daily (in Chinese). Retrieved 2010-05-03.
  25. "2009 Q4 Financial Report" (PDF). SOHO China. 2010-03-11. p. 4. Retrieved 2010-03-18.
  26. "2009 Q4 Financial Report". Xinyuan Real Estate. 2010-02-11. p. 13. Retrieved 2010-03-18.
  27. "Xinyuan Real Estate Co., Ltd. (ADR) (Public, NYSE:XIN)". Google Finance. 2010-03-18. Retrieved 2010-03-18.
  • Chiang, S. (2016). Rising residential rents in Chinese mega cities: The role of monetary policy. Urban Studies, 53(16), 3493-3496. doi:10.1177/0042098015613753
  • Huang, Y. (2003). Renters' housing behaviors in transitional urban China, Housing Studies, 18(1), 103-126. doi: 10.1080/0267303032000076867

Further reading

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