Page 222 - 2019 White Paper on the Business Environment in China
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9 White Paper on the Business Environment in China
Investment and Rental Property declines in prices. Homeownership rates in China are
among the highest in the world, at almost 90 percent.
China’s property investment growth jumped to a Rentals, meanwhile, have been a hard sell, in part because
three-year high in the January to February 2018 period, of limited tenant rights and the low quality of much of
as local governments pushed ahead with construction the stock. Even if the new policies can help change that
projects. The National Bureau of Statistics (NBS) said mindset, challenges abound. First, China’s leaders have to
Property said investment jumped 9.9 percent during ensure they’re able to tame the market without tanking
the two-month period year-on-year. This is the strongest home prices. They’ll also have to balance other underlying
growth since the January to February period in 2015. drivers pointing to slowing demand. And officials would
Residential property investment was up 12.3 percent, need to drop an old habit of letting prices boom whenever
the fastest pace since August 2014. The upbeat figures the economy needs a boost (Dong and Panckhurst).
contrasted with a substantial slowdown in property sales
and home new starts, which usually go in sync with the Commercial
property investment data. Developers stockpiled huge
land reserves in 2016 when the financing cost was low Guangzhou’s investment market recorded a total
and the market outlook was bullish. Many have since transaction volume of 12 billion yuan in the first three
shown a reluctance to break ground on these recently quarters of 2018, up 9.8 percent compared to the same
acquired development sites, which were bought at a nine-month period the previous year. However, Q3 total
premium soon before the market was to soften as the investment volume was down by 26.7 percent since
government rolled out measures to cool runaway home many of the properties that changed hands were located
prices (Zheng). China’s residential property market in non-core areas with comparatively lower sales prices.
showed signs of cooling in February 2018 as fewer cities Still, total investment volume was up 89.1 percent year-
reported price gains for the month. Liu Jianwei, senior on-year. Office properties remain the preferred asset
statistician at the NBS said the slowdown was most class in Guangzhou, accounting for 44.9 percent of
pronounced in first- and second-tier cities, while third- total investment consideration. These numbers reflect a
tier cities carried the bulk of the price gains (Liu). growing interest in acquiring decentralized assets. (Yuan).
The residential property business is in a bit of a flux. Area planning and large-scale infrastructure projects
“China’s property market is on the brink of tremendous continue to bolster investment construction across the
change,” said Shen Jianguang, chief Asia economist at GBA. Each of the areas in the 9+2 GBA city cluster have
Mizuho Securities Asia Ltd. in Hong Kong. “The push their own strengths. According to Jiang Binghe, Senior
for rental properties shows a new model is starting to Director and General Manager of Business Marketing, The
emerge.” President Xi Jinping is leveraging his immense Greater Bay Area Services and Free Trade Port in Hainan,
power to try to solve a problem that’s dogged policy Cushman & Wakefield, there are three key factors to
makers around the globe: spiraling property prices consider when deploying capital from an industry sector
in major metropolitan areas that have fueled rising and real estate investment perspective: competitive
inequality. The aim seems to be a new market model, industry positioning, infrastructure development,
somewhere between the capitalist frenzy that sent home and investment opportunities created as satellite and
prices in Shanghai and Beijing rocketing ever higher and industrial towns develop further. Shenzhen, Hong Kong
the Communist system where dwellings were allocated and Guangzhou will remain the priority target locations
by work units. In theory, a thriving rental market would for high-quality office property investment. However,
add housing supply and help stabilize prices after a 13- the completion of several transportation infrastructure
year property rally. The old model that prioritized home projects will integrate cities throughout the Pearl River
ownership encouraged “a lot of speculation and crazy Delta, creating opportunities in cities such as Zhuhai,
price gains -- and that model is coming to an end,” said Zhongshan, Foshan, and Dongguan (Jiang).
Rosealea Yao, an analyst at Gavekal Dragonomics in
Beijing. City governments from Beijing to Shanghai have Skyscrapers
earmarked public land to auction to property companies
that would develop rental projects only. Xi is trying to Fifteen years ago, there were barely any high-rises in
alter the popular belief that property is a one-way bet, China. Now, China is home to 48 out of the top 100 tallest
since booms have inevitably followed any short-lived completed building in the world. It also has over 60 more
222
Investment and Rental Property declines in prices. Homeownership rates in China are
among the highest in the world, at almost 90 percent.
China’s property investment growth jumped to a Rentals, meanwhile, have been a hard sell, in part because
three-year high in the January to February 2018 period, of limited tenant rights and the low quality of much of
as local governments pushed ahead with construction the stock. Even if the new policies can help change that
projects. The National Bureau of Statistics (NBS) said mindset, challenges abound. First, China’s leaders have to
Property said investment jumped 9.9 percent during ensure they’re able to tame the market without tanking
the two-month period year-on-year. This is the strongest home prices. They’ll also have to balance other underlying
growth since the January to February period in 2015. drivers pointing to slowing demand. And officials would
Residential property investment was up 12.3 percent, need to drop an old habit of letting prices boom whenever
the fastest pace since August 2014. The upbeat figures the economy needs a boost (Dong and Panckhurst).
contrasted with a substantial slowdown in property sales
and home new starts, which usually go in sync with the Commercial
property investment data. Developers stockpiled huge
land reserves in 2016 when the financing cost was low Guangzhou’s investment market recorded a total
and the market outlook was bullish. Many have since transaction volume of 12 billion yuan in the first three
shown a reluctance to break ground on these recently quarters of 2018, up 9.8 percent compared to the same
acquired development sites, which were bought at a nine-month period the previous year. However, Q3 total
premium soon before the market was to soften as the investment volume was down by 26.7 percent since
government rolled out measures to cool runaway home many of the properties that changed hands were located
prices (Zheng). China’s residential property market in non-core areas with comparatively lower sales prices.
showed signs of cooling in February 2018 as fewer cities Still, total investment volume was up 89.1 percent year-
reported price gains for the month. Liu Jianwei, senior on-year. Office properties remain the preferred asset
statistician at the NBS said the slowdown was most class in Guangzhou, accounting for 44.9 percent of
pronounced in first- and second-tier cities, while third- total investment consideration. These numbers reflect a
tier cities carried the bulk of the price gains (Liu). growing interest in acquiring decentralized assets. (Yuan).
The residential property business is in a bit of a flux. Area planning and large-scale infrastructure projects
“China’s property market is on the brink of tremendous continue to bolster investment construction across the
change,” said Shen Jianguang, chief Asia economist at GBA. Each of the areas in the 9+2 GBA city cluster have
Mizuho Securities Asia Ltd. in Hong Kong. “The push their own strengths. According to Jiang Binghe, Senior
for rental properties shows a new model is starting to Director and General Manager of Business Marketing, The
emerge.” President Xi Jinping is leveraging his immense Greater Bay Area Services and Free Trade Port in Hainan,
power to try to solve a problem that’s dogged policy Cushman & Wakefield, there are three key factors to
makers around the globe: spiraling property prices consider when deploying capital from an industry sector
in major metropolitan areas that have fueled rising and real estate investment perspective: competitive
inequality. The aim seems to be a new market model, industry positioning, infrastructure development,
somewhere between the capitalist frenzy that sent home and investment opportunities created as satellite and
prices in Shanghai and Beijing rocketing ever higher and industrial towns develop further. Shenzhen, Hong Kong
the Communist system where dwellings were allocated and Guangzhou will remain the priority target locations
by work units. In theory, a thriving rental market would for high-quality office property investment. However,
add housing supply and help stabilize prices after a 13- the completion of several transportation infrastructure
year property rally. The old model that prioritized home projects will integrate cities throughout the Pearl River
ownership encouraged “a lot of speculation and crazy Delta, creating opportunities in cities such as Zhuhai,
price gains -- and that model is coming to an end,” said Zhongshan, Foshan, and Dongguan (Jiang).
Rosealea Yao, an analyst at Gavekal Dragonomics in
Beijing. City governments from Beijing to Shanghai have Skyscrapers
earmarked public land to auction to property companies
that would develop rental projects only. Xi is trying to Fifteen years ago, there were barely any high-rises in
alter the popular belief that property is a one-way bet, China. Now, China is home to 48 out of the top 100 tallest
since booms have inevitably followed any short-lived completed building in the world. It also has over 60 more
222
