Cross-posted from Investing in Chinese Stocks.
Ni Pengfei of CASS says a deep correction will begin in September and last into the first half of 2017. The correction may be concentrated in the hot second-tier cities that have seen the largest increase in price and sales, and the the impact on the broader economy will be larger because the decline will also influence third and fourth-tier cities. The rising inventory which has plagued third- and fourth-tier cities will expand into second- and third-tier cities as the correction unfolds.
JRJ: 社科院专家：中国楼市将现短期调整
This year in September to the first half of next year, the property market in general will be a short-term adjustment, adjust the depth of the city is more concentrated. The dimension of time, the real estate sales prices and sales volume was down trend growth or the growth rate or the volatility of real estate investment. Adjustment may be slightly late, but not absent. Spatial dimension, and a second-tier cities will focus depth adjustment, is expected to increase urban housing stock continues to spread from the following four-tier cities to second and third tier. Compared with the previous, this cycle is the market more time to start, but the concentration of market overheating unprecedented time and space, depth adjustment cities are relatively concentrated. Although the four-tier cities and the following adjustment flexibility of small, but because of a second-tier cities are not only the country’s total hot large market share, and strong wind vane significance, therefore, this country’s housing market correction and its impact on the macroeconomic impact would be more significant.
As has been discussed here in several posts, the slowing credit market will end the rally in home prices:
First, the decision to change the fundamentals, the market is cyclical adjustment is inevitable. Decline in real estate for the last round of macroeconomic and downstream, from the second half of 2014, the central government began to turn positive and regulation continue to overweight, but not until mid-2015, the property market (volume and price) began to accelerate into the slow path, but the entire 2015 investment swooping decline in confidence in this major financial institutions, leading financial institutions for credit mortgages and development loans disgust. In early 2016 a large number of serving and monetary policy to the inventory, completely changed the expectations of financial institutions, mortgage loans continued to grow more than 50% at the same time, delay the development of the enterprise funds in place gradually increase to 1 – More than 15 per cent in July. The future, the overall monetary policy will tend to be neutral, to obtain the release of the stage in the past year even after the overdraft, the stock of urban population will slow down consumer demand. Credit crunch and market Qudan, resulting in volume and price drop will result in investment slowed. From mid-2015 to the end of 2016, the rise of the market will reach one and a half.
He sees some counteracting forces such as recent reforms designed to aid rural families, which will increase demand for urban housing. On the downside, he sees some cities being hard hit by the sudden exit of speculators, causing a blow to market confidence across the nation:
Some potentially valuable city continue to be discovered and turns to speculation that some four-tier cities will be affected by the radiation, infection and impact. Later it will cause central importance, and instructed the relevant city government has introduced more stringent financial, taxation or administrative policies to curb speculation, which led to substantial investment will quickly disappear or teleport. Hot and overdraft potential of the city after the sharp adjustment in the downturn. The national property market confidence will be negatively affected.
He suggests governments prepare contingency plans now.
And some of the hot cities have only begun rolling out buying restrictions in July and August while others are only rumoured to be doing so driving some perverse outcomes. Shanghai sales of new homes climbed above 2000 yesterday, the seventh straight day of sales above 1000 units. It marks a massive increase over the prior week:
Shanghai chain market research data show, August 22 to August 28 week, Shanghai commercial housing turnover is 555,700 square meters, up 93.02% week-on-week; average transaction price was 43,571 yuan / square meter, up 5.60%.
Rumors of tighter credit and new divorce rules have fueled sales.
Preceding the recent unrest is closely related to the emergence of Shanghai “New Deal credit purchase rumors.” To date, the network spread several versions, including a conditional raise the proportion of down payment, even including the “divorce less than a year, the purchase and loan policies in accordance with the family situation before the divorce process,” and referred to the Executive after September 1.
Rumors spread more in the future, houses single-day volume of about 1,700. This figure rose sharply compared with the daily average volume of new homes on weekdays 300-400 sets, two days after the “325 New Deal”.
Caixin: 上海一手房成交量连续七日过千套
The Australian: Shanghai couples rush to divorce for cheaper homes
Spouses were scrambling to cut ties, at least on paper, amid rumours that the city might soon shut a loophole that families often use to buy more property: divorce. The surge is a response to concerns about rising property prices and government efforts to slow the increase.
Under current rules, a family buying a second home is required to put a down payment of up to 70 per cent while a first-time buyer needs to put up only 30 per cent. Widespread rumours — denied by housing authorities — say the penalty would be extended to those recently divorced for one year.
Dozens of couples packed into Shanghai’s Xuhui District Divorce Registration Office to register divorces eager to break up. One woman, who gave her surname as Gu but declined to give her full name, said she was there to help her parents divorce after 35 years of marriage. The idea is to buy an apartment for the older couple that has an elevator, said Ms Gu, and the divorce can help the “buyer” save on the down payment.
“We don’t have much money, so there’s no other way. The property price is so high that it’s unbearable for us,” Ms Gu said. The divorce, she said, wouldn’t destroy her family, because her parents have a stable relationship.
