Balanced growth seen in June.

“The overall market data taken at a national level still proves promising in June with all indicators pointing at year-to-date year-on-year growth, and all but real estate investment and completed area, recording an acceleration in pace in June.” said James Macdonald, Director of China Research

National real estate data for June 2017 was released on July 17, 2017.

YTD figures analysis

Real estate investment stood at RMB5.06 trillion in the first six months of 2017, up 8.5% year-on-year (YoY), a slower pace from the 8.8% recorded the first five months of the year. Furthermore, total land sales increased 8.8% year-on-year (YoY), from 95 million sq m to 103 million sq m. At the same time, the total land sales consideration increased 38.5% to RMB438 billion, indicating that the average price of land sold increased by 27.3% to RMB4,232 per sq m. New starts growth accelerated to a growth of 10.6% YoY in the first six months, with 857 million sq m under way.

The volume of space completed has increased 5.0% YoY to 415 million sq m. There remains currently 6.92 billion sq m under construction, up from 6.70 billion sq m a year before. The volume of space sold increased to 747 million sq m by June 2017, up from 643 million sq m the previous year, while the average price paid increased 4.6% YoY to RMB7,923 per sq m. The combined effect of these two indicators means the total consideration paid increased 21.5% YoY, to RMB5.92 trillion.

Despite the restrictions that have been put in place in many markets since late 2016 as well as the tighter credit environment, figures from the first six months remain relatively healthy. All growth rates accelerated with the exception of investment levels and volume of space completed. All sectors recorded growth in pricing, with the pace of growth in the residential market accelerating by 0.9 ppts to 3.9%.

Outlook

Despite certain cities recording a much more marked slowdown in land sales, property transactions and price growth (as a result of recent regulations designed to cool the market), the national level statistics indicate that the rest of the country has continued to turn out steady growth in most of the major indicators.

Developers seem to be taking a nuanced approach to the market, depending upon their own background, their cash flow situation and geographical and policy exposure. Some seem to be willing to play ball with the government and toe the line with regard to price setting, happy to liquidate assets and realise the significant profits that they have generated as a result of the incredible market over the last two years. Others seem to be hoping that the most recent wave of restrictions will prove to be temporary and that they will be able to sell their units at a later date for a higher value.

Given past experiences, should policy restrictions prove successful in curbing price growth in the short term there is the possibility that policies may be loosened in the next 12-18 months, however the past does not always dictate what will happen in the future.

Glossary

YTD: Year-to-date

YoY: Year-on-year

MoM: Month-on-month