China Construction Bank Chairman warns not to buy property now
January 8, 2019 Category China News Round-up, Weekly
Tian Guoli, Chairman of China Construction Bank (CCB), warned Chinese investors not to buy property now because “there’s no money to be made” due to high prices and alarming vacancy rates. CCB provides mortgage loans to millions of Chinese households. Tian said that the room for further property price rises was limited and it was unwise to buy at current rates. “There’s no money to be made if you buy a flat nowadays. If you insist on buying a home, aren’t you trapped at the high price level?”, Tian told a forum organized by Peking University’s Guanghua School of Management. The warning by Tian came at a time when the country is in a heated debate about the role of the property market – whether it will lead to a bust or whether it can help shore up the economy. The major question is whether the central government will ease its curbs on the property market this year to provide a stimulus to the slowing Chinese economy.
At the recently concluded Central Economic Work Conference, the top leadership promised to build a long-term mechanism for the property market, on the basis that “property is for living, not for speculation”, adding that regulations would vary from city to city. Over the past two decades property has proved to be one of the best investments in China. Despite constant government intervention – from purchase restrictions and sales limits to mortgage loan constraints – the average price has soared, making property in Beijing and Shanghai as expensive as London or Tokyo. However, there has also been increasing concern that a downturn in the housing market would hit households, banks and developers hard – and this in turn would be a serious threat to China’s state banks and local governments, whose revenues are tied to the property market.
The value of outstanding real estate loans – including mortgage and development lending – reached CNY38 trillion by the end of September 2018, or 28% of total lending. The combined value of properties in China, Tian warned, has reached USD40 trillion, larger than the USD30 trillion in the United States. While many property speculators in the West prefer to rent out their properties to ensure a rental income, in China it is more common to keep newly-build apartments empty because lived-in properties lose some of their value. While there are no official figures on the number of vacant homes it is believed to be much higher than the 10% recorded in the U.S. at the time of the subprime crisis. Tian said China still had an adequate supply of housing stock, with shortages limited to a few big cities, but adding that it was important to ensure there were enough rental properties available. Global property services company JLL said 750,000 newly completed rental homes would hit the markets in China’s six major cities – Shanghai, Beijing, Guangzhou, Shenzhen, Hangzhou and Chengdu – by the end of 2022. The new supply represents about a sixfold increase over the current stock of 135,000 units in these six cities. According to JLL, China is home to more than 200 million people who rent homes. A study by RentCafé, a division of Yardi Systems, shows Shanghai was the third most expensive city in Asia based on rent rates in 2017, behind only Hong Kong and Singapore.
The latest China household finance survey conducted by the Southwest University of Finance and Economics found that the number of vacant urban homes in China has risen to 65 million units in 2017 from 42 million units in 2011, with the vacancy ratio rising to 21.4% from 18.4% in the period. China’s small cities had more serious vacancy problems than bigger ones. The average living area of Chinese urban residents already reached 36.6 square meters in 2016, the South China Morning Post reports.
- KURT VANDEPUTTE (UMICORE) APPOINTED CHAIRMAN OF THE BOARD OF THE FLANDERS-CHINA CHAMBER OF COMMERCE (FCCC)
- Webinar: “Knowing Your Chinese Partner” – May 26, 2021, 10 am – 12 am
- EMA starts rolling review of CoronaVac, WHO approves Sinopharm vaccine for emergency use
- The Global Times warns not to politicize the Comprehensive Agreement on Investment (CAI)
- Hainan to become biggest duty-free market in the world