Market remains stable in August with growth rates slowing moderately

15 September 2017

 

“The latest figures point to a relatively stable market in August with growth rates moderating down in most cases but overall growth levels remaining relatively positive.” said James Macdonald, Director of China Research  

National real estate data for August 2017 was released on September 14, 2017.

YTD figures analysis

Real estate investment stood at RMB6.95 trillion in the first eight months of 2017, up 7.9% year-on-year (YoY). Furthermore, total land sales increased 10.1% year-on-year (YoY), from 129 million sq m to 142 million sq m. At the same time, the total land sales consideration increased 42.7% to RMB661 billion, indicating that the average price of land sold increased by 29.6% to RMB4,645 per sq m. New starts continued to slow to 7.6% YoY in the first eight months, with 1.15 billion sq m currently under way.

The volume of space completed has increased 3.4% YoY to 523 million sq m. There remains currently 7.22 billion sq m under construction, up from 7.0 billion sq m a year before. The volume of space sold increased to 985 million sq m by August 2017, up from 875 million sq m the previous year, while the average price paid increased 4.0% YoY to RMB7,925 per sq m. The combined effect of these two indicators means the total consideration paid increased 17.2% YoY, to RMB7.8 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 eight months remain relatively healthy.

Most indicators recorded a deceleration in August, the only exceptions being land sales consideration and average price as well as a slight increase in space completed. Part of the reason for the increase in land prices might be the result of a decrease in land supply in certain markets at a time when many developers find themselves in a relatively cash positive situation. Developers are also turning to the second hand market either buying plots from smaller developers, portfolios of development opportunities or entire platforms. This is leading to a consolidation of the developer market, making it easier for the government to implement regulations by working with these key players.

Outlook

While the momentum of the last two years has been able to carry the market forward despite a number of new restrictions and tighter monetary policy, growth rates are likely to continue slowing in the coming months as the year draws to a close. Growth rates however remain positive and therefore the government is unlikely to loosen up restrictions in any meaningful way, especially given the continued struggle to rein in debt levels. A continued slowdown in the real estate market is likely to continue for the foreseeable future.

Glossary

YTD: Year-to-date

YoY: Year-on-year

MoM: Month-on-month

 
 

Key Contacts

Olivia Shao

Olivia Shao

Director
Marketing & Communications, Savills China

Savills Shanghai

+8621 6391 6688 Ext.8893