2008-2009 Report on China's Property Market

Publication Date	July 2009
Publisher	Market Avenue
Product Type	Report
Pages	93
ISBN Number	not applicable
Product Code	MKA00058

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Summary

Although investment in property development and the completed building area continued to increase in China in the first 10 months of 2008, the sales volume of both the completed and uncompleted housing were dropping. According to National Bureau of Statistics of China, RMB2,391.8bn were invested in real estate industry in China in the first 10 months of 2008, up by 24.6% year-on-year; the building area under construction 2.48bn m2, up by 18.7% year-on-year; and the completed building area 310m m2, up by 9.1%. The sales volume of building area, however, dropped drastically, with only 450m m2 being sold in the first 10 months of 2008, down by 16.5% year-on-year. On the other hand, land market cooled as a whole. About half of the land was sold at bottom prices, and 10% failed to be sold at auction in the first half of 2008.

1. Cyclical factors force China's property market to go down.

The downturn tells us that China's property market has entered in a cyclical adjustment stage, and the situation would be worse in 2009. But the market is supposed to be in upward cycle by 2010.

2. Supply would be sufficient in China property market in the next 2 years, and vacancy rates rise.

1999 through the end of August 2008, basic balance was kept between supply and demand in China's property market, with accumulatively 5.5bn m2 new commercial building area under construction, 3.7bn m2 completed, and 3.74bn m2 sold. The commercial building area that is under construction now is 1.76bn m2, and would be available in the market in the next two years. Against such a downturn in the market, there would be a period in which supply would exceed demand. Data showed that by the end of August 2008 commercial housing of 130bn m2 was vacant, up by 8.7% year-on-year. Of those vacant housing, residential ones account for 65.55m m2, up by 8.7% year-on-year.

3. Actual demand would reduce because of macro-controls and credit shrinking.

(1) Firstly, demand for investment would be greatly restrained.

In September 2007, People's Bank of China and China Banking Regulatory Commission jointly issued Notice on Improving Management of Credit for Commercial Property, of which the provisions on increasing mortgage rates and interest rates of loans for buying a second house achieved obvious success in checking demand for investment, against the background of increased investment cost and weak market.

(2) Secondly, shrinking credit has resulted in dropping actual purchasing power of housing buyers.

Most housing buyers couldn't afford a house unless they get the support from banks in the form of mortgage loans. That is to say, housing prices depend greatly on the availability of bank loans. Now that the housing market is so weak and credit shrinking, banks are worried about increasing credit risks and took the initiative to cut down mortgage loans to housing buyers. On the other hand, buyers expect falling housing prices, thus that they hoard cash and lose interest in mortgage loans. As a result, housing prices couldn't rise anymore because of the shrinking supply of bank loans and dropping demand of buyers for mortgage loans.

(3) The appreciation of renminbi slows down, making renminbi assets less attractive.

Revaluation of renminbi assets plays a big part in the rapid rise of housing in China when renminbi appreciated at a high speed. But as the appreciation is slowing down, the effect of revaluation has become weak. By the end of August 2008, renminbi had appreciated by 19.2% from before China's reform and open to the outside world. And now, with slower growth of China's economy, renminbi would hardly be able to appreciate substantially. On the other hand, the dollar having bottomed out and become stronger has also made renminbi assets less attractive. If renminbi is expected to be less promising as for appreciation, hot money holders would dump their assets in China, which would create more pressure on property prices.

Content

Chapter One: Business Environment of Property Industry in China
- 1.1 Economy
  - 1.1.1 Economic Growth
  - 1.1.2 Income and Purchasing Power of Residents in China
  - 1.1.3 China's Economic Structure
- 1.2 Industrial Environment
  - 1.2.1 Status Quo and Trend of China's Construction Industry
  - 1.2.2 Status Quo and Trend of Land Market
  - 1.2.3 Status Quo and Trend of Building-Material Industry
  - 1.2.4 Status Quo and Trend of Property Breakage in China
  - 1.2.5 Status Quo and Trend of China's Capital Market
- 1.3 Government Policies
  - 1.3.1 Interest Rates
  - 1.3.2 Lending Policies
  - 1.3.3 Taxation Policies
  - 1.3.4 Land Transferring Policies
  - 1.3.5 Property Laws
  - 1.3.6 Housing Laws
  - 1.3.7 Monetary Policy
  - 1.3.8 Financial Policies
Chapter Two: Status Quo and Trend of China's Property Market
- 2.1 General
  - 2.1.1 Stage of Development
  - 2.1.2 Overall Market Scales
  - 2.1.3 Competitive Landscape
- 2.2 Supply and Demand
  - 2.2.1 Supply
  - 2.2.2 Demand
  - 2.2.3 The Amount Invested in and the Regional Structure of China's Real Estate Industry
- 2.3 Niche Markets
  - 2.3.1 Commercial Houses
  - 2.3.2 Commercial Property
  - 2.3.3 Low-Cost Housing
  - 2.3.4 Office Buildings
- 2.4 Sales of Commercial Buildings in China 2008H1
  - 2.4.1 Overall Sales Volume and Changes
  - 2.4.2 Sizes and Changes of Investment in Real Estate Development
  - 2.4.3 Sales Volume and Changes of Commercial Buildings in Major Cities of China
  - 2.4.4 Sales Prices of Residential Housing in 70 Large and Medium-sized Cities
- 2.5 Price Movement in China's Real Estate Market 2008H1
  - 2.5.1 Rankings of Real Estate Prices in Markets of China's Major Cities
  - 2.5.2 Rankings of Housing Price Rise in Major Cities of China
  - 2.5.3 Relationship between Housing Prices and Local Economies
- 2.6 Operation of Real Estate Market in Major Cities of China 2008H1
  - 2.6.1 Beijing
  - 2.6.2 Shanghai
  - 2.6.3 Guangzhou
  - 2.6.4 Shenzhen
  - 2.6.5 Nanjing
  - 2.6.6 Suzhou
  - 2.6.7 Chengdu
  - 2.6.8 Fuzhou
  - 2.6.9 Wuhan
  - 2.6.10 Dalian
  - 2.6.11 Tianjin
  - 2.6.12 Wuxi
  - 2.6.13 Hangzhou
  - 2.6.14 Changsha
  - 2.6.15 Chongqing
  - 2.6.16 Qingdao
  - 2.6.17 Nanchang
  - 2.6.18 Xi'an
- 2.7 Funding Shortage in China's Property Industry
  - 2.7.1 Funding Sources
  - 2.7.2 Spending of China's Property Industry
  - 2.7.3 Historical Analysis of Funding Shortage
  - 2.7.4 Forecast for and Analysis of Funding Shortage in China's Property Industry
Chapter Three: Operation of Property Industry in China
- 3.1 Operation
  - 3.1.1 Solvency
  - 3.1.2 Profitability
  - 3.1.3 Development Capacity
  - 3.1.4 Operational Skills
  - 3.1.5 Labor Productivity
  - 3.1.6 Ratio of Bank Loans
- 3.2 Operational Performance of Companies
  - 3.2.1 Business Operation of China's Top 100 Real Estate Companies
  - 3.2.2 Business Operation of Public Real Estate Companies in China
  - 3.2.3 Business Operation of National Real Estate Companies in China
  - 3.2.4 Business Operation of Regional Real Estate Companies in China
Chapter Four: Features and Trend of Investing, Financing and M&A of China's Property Industry
- 4.1 Status Quo of Investing, Financing and M&A of China's Property Industry
  - 4.1.1 Capital Size of the Industry
  - 4.1.2 Investment Hotspots
  - 4.1.3 Regions for Investment
  - 4.1.4 Approaches and Channels of Investment
  - 4.1.5 Returns on Capital
- 4.2 Status Quo and Trends of R&D Investment in China's Property Industry
Chapter Five: Status Quo of Bank's Credit Loans in China's Property Industry
- 5.1 Credit Granted by Banks to China's Property Industry
  - 5.1.1 Scales of Credit Granted
  - 5.1.2 Ways to Grant Credit
  - 5.1.3 Mix of Credit
  - 5.1.4 Non-Performing Loans
  - 5.1.5 Comparison of Non-Performing Loans between Banks
- 5.2 Credit Granted by State Banks to Property Industry
  - 5.2.1 Influence of State Banks' Credit Policies on Property Industry
  - 5.2.2 Scales of Credit Granted by State Banks to Property Industry
  - 5.2.3 Non-Performing Loans of State Banks to Property Industry
  - 5.2.4 Shares of Bank Loans to Property Industry in Total Loans of State Banks
  - 5.2.5 Shares of Loans to Property Industry in Total Loans of State Banks
- 5.3 Status Quo of Credit Granted by Official Policy Banks to Property Industry
- 5.4 Status Quo of Credit Granted by Urban Commercial Banks to Property Industry
- 5.5 Status Quo of Credit Granted by Joint-Stock Banks to Property Industry
- 5.6 Status Quo of Credit Granted by Rural Commercial Banks to Property Industry
- 5.7 Status Quo of Credit Granted by Foreign Banks to China's Property Industry