Chinese Academy of Social Sciences Sees Housing Prices Falling Across 2018


One of China’s leading state think tanks expects housing prices in the country to remain steady or even potentially decline in 2018.

The Chinese Academy of Social Sciences (CASS) launched the “Real Estate Blue Paper: China’s Real Estate Development Report No. 15 (2018)” (房地产蓝皮书:中国房地产发展报告No.15(2018)) on 14 May in Beijing, outlining its forecasts for near-term property policies as well as market performance.

The Report expects the municipal property control policies launched by cities around China over a year ago to remain “steady,” establishing a stable market environment for housing system reforms and long-term real estate control measures.

Tight controls of the housing market and de-stocking policies will continue to run in parallel, while there is the possibility that some hot-spot Chinese cities will see the launch of even stricter controls.

The Chinese central government recently summoned representatives from 12 municipal governments around the country in order to reiterate the importance of tight real estate controls.

The Report also forecasts that 2018 will be a “low point” for the Chinese real estate market, with prices stabilising or falling as a direct result of the property control policies imposed by municipal authorities.

With respect to the supply side, first-tier and hot-spot second-tier cities may see further increases in land supply in order to help resolve inventory issues, but price control policies are unlikely to be relaxed, and supply will continue to remain tight in key markets.

With respect to the demand side, the fundamental policy theme that “homes are for occupation, not speculation,” will remain unchanged, while restrictions on bank loans will also cause the cost of home purchasing to markedly increase, putting a heavy cap on transaction levels.

Wang Yeqiang (王业强), a researcher at CASS’s Development and Environment Research Institute and executive editor of the blue paper, said at its launch that because tight real estate control policies won’t be relaxed, first-tier and hot-spot second-tier cities will be the first to bottom out in terms of prices.

The price index for first-tier Chinese cities is continuing to fall in the first half, entering negative territory, but could stabilise in the second half, while the price index for second-tier cities could see further declines across the full year.

For third and fourth-tier cities, comparatively loose policies and demand spill-over will support property markets, but as restocking policies are gradually withdrawn CASS expects market adjustments to be launched.

Beijing’s housing market will continue to see a tepid performance on the back of its own property control policies, while down in the south of the country Guangzhou will focus on the development of the home leasing market, lending will remain tight, and adjustments to the real estate taxation system will continue.

The central Chinese metropolis of Chongqing will also see the ongoing expansion of home leasing policies, as well as a peak in high-rise office supply.

Home loan rates are expect to continue to rise in many parts of the country, with the “2018 Q1 China Monetary Policy Execution Report” (2018年第一季度中国货币政策执行报告) just recently released by the Chinese central bank indicating that the weighted average home loan rate in March was 5.42%, for a rise of 0.16 percentage points compared to December.

Rong360 data further indicates that the average first home loan rate of 533 banks in 35 cities around China in April was 5.56%,  or 1.135 times the benchmark rate, for a rise of 0.91% compared to April, and a rise of 23.01% compared to the rate of 4.52% in the same period last year.

“The current situation of rising credit demand from the enterprise sector and tight credit will continue, and will also drive continued gains in personal home loan rates,” said the report.

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