China’s for-sale residential markets continue to benefit from demographics, economic, and policy changes adopted over the past year. Intrinsic end-user demand from the expanding middle class has been combined with a return of investors no doubt seeking to diversify from the volatility of the equity markets. The recent rapid increase in the housing price in Tier 1 cities (+27.3% YoY) and selected Tier 2 cities, prompts us to ask if some more restrictive measures may be re-introduced in some cities. Tier 2 cities as a group have also experienced price growth (+3.6% YoY) although with considerable city variation in performance, whereas Tier 3 cities overall, are still down (-1.0% YoY). Increases in the volume of sales over the past year suggest that price growth may gain traction as unsold inventory falls. The price for Tier 1 cities where demand is strong and is supported by growing population and wealth accumulation increased rapidly as monetary policy loosened. The worst supply-demand imbalances remain in the Tier 3 and 4 cities where the inventory pressures remain high. Yet even there, several policy tools have been deployed. Authorities are buying some of this stock for use as social housing. The relaxation of Hukou (population registration and migration rules) and increasing incentives in some provinces for rural dwellers to access urban housing should slowly start to encourage demand even in those smaller cities.
Source : CBRE Global Investors