Cross-posted from Investing in Chinese Stocks.
The headlines out on the last day of the Golden Week holiday within the Golden October season for real estate sales are generally very positive, with sales up in much of the country as home buyers who plan to live in the property take advantage of the recent easing of mortgage rules.
A story on Tianjin’s ghost villas. Back in June, media covered the Baodi area. Prior coverage here Tianjin Rebuilds Manhattan in Binhai; Has 90% Empty Ghost City in Baodi with several pictures. Here is a Google translated article with a few more pictures:Abandoned Villas in Tianjin.
The latest news is that prices are being slashed to move inventory. This area is dubbed “Asia’s largest” villa development, with more than 3000 homes built. Prices are down 30% recently and now roughly 40% overall; below ￥5000/sqm; with homes selling for around ￥800,000, down from more than ￥1,300,000. There are several factors involved in keeping the development depressed: there’s no action on a potential high speed rail stop and hospitals, supermarkets and schools are not yet built. Over 50 photos at the link. Source: iFeng. 内地知名度最高五大空城：“亚洲最大别墅区”七折
Sanya in Hainan has cancelled its remaining buying restrictions. Only the big four, Beijing, Shanghai, Guangzhou and Shenzhen still have buying restrictions. The article also quotes Zhang Dawei of Centaline saying that the government’s new policies have moved marginal buyers into the market, lifting sales above forecasts and by about 10-20% above prior levels. Source: iFeng 海南三亚取消住房限购 执行城市仅剩北上广深
In Wuhan, sales are up 30% over 2013. Bank staff on site at developer sales offices said that at 30% off, bank profits are near zero, so it will be very difficult to obtain that rate. 10% off is the more likely rate buyers will receive. Source: iFeng 武汉新房成交同比增近三成 购房者交定金抢房
Another optimistic report out of Guangdong, this one on a possible market turning point. It seems the reporters there take less vacation time as most of the stories to date have Guangzhou bylines…. Source: iFeng 楼市变化成关注焦点 市民长假天天楼盘一日游
Finally an English report from the SCMP: Effectiveness of mainland housing policy easing hinges on banks
Sentiment has improved in the mainland’s housing market after a policy relaxation last week, but much depends on whether the banks embrace the spirit of Beijing’s move and free up lending.
Amid recent deteriorating economic indicators, the central bank unveiled a slew of measures to support home purchases and reopen financing channels for cash-strained developers, in the first such policy easing since 2010. The property market is a major growth engine for the broader mainland economy.
Some families hastened their home purchases, worrying that prices would soon start to rise again, and some developers stopped offering discounts, the South China Morning Post found during visits to five projects in a booming suburban area of Beijing before and after the policy announcement on Tuesday last week.
Given what the banker in Wuhan said above and how that jives with comments from bankers throughout the year, reliance on the banks is not a recipe for success.
Tianjin and Beijing have seen little effect from new policies since the 30% discount allowed by the central bank will be almost impossible to obtain because it is up to individual banks to make the discounted loans. Source: Sina 京津多个楼盘未现新政利好 7折利率难大范围推广
Yet another Sina 松贷后二线楼市速暖:开发商频玩涨价后悔地买少了 article shows how fast psychology has turned in some corners: some developers are now remiss about not taking the opportunity to buy land in the prior three quarters, when prices were depressed. It is now expected that prices will rise in the fourth quarter and larger developers will muscle out small and medium developers who are still facing financing issues. Supposed inside documents from some developers which show plans to raise prices on October 8 or October 10, after the holiday, are attracting some attention. There’s a dispute over whether the documents are legit, or a ruse to drive sales during the holiday period. There’s a big difference in confidence between those two possibilities.
A more measured take expects the market to reach a turning point by late October, once the new credit policies start taking effect. Sales were better than expected during the National Holiday though, and probably even better than current data shows due to lags in the official government sales data. Source: QQ Finance 楼市信贷新政力度超市场预期 房企放风要涨价
The most stunning item is the report on the smaller developers who after one week of a policy change that has barely even been implemented and may never be implemented by banks, think the market has turned and regret not buying more land this year. It seems hope never really died and that if the government did force through a credit increase, the bubble would quickly reinflate. This also may mean many small developers still have not accepted reality and are trying to hang on in this market, probably by means of very expensive and risky private loans.
My overall take is that there’s signs of optimism, but developers are like a starving man being fed a few crumbs. Sentiment was so negative and here’s a glimmer of hope from the central bank…but commercial banks probably won’t risk their balance sheets on a weakening real estate market. If I’m right, reality will set in by the end of October.
