Citi Says China Housing Boom to Continue in 2017

Analysts at one of America’s best-known banks are predicting continued good health for China’s already vigorous residential real estate market into next year.

Citigroup predicts China’s housing market will remain ‘robust’ in 2017 given government support and higher prices, according to a report in the South China Morning Post. The bullish outlook from the US bank comes as other market observers warn that the country’s current housing boom may have run its course.

“Unsold stock will only be cut if home prices keep rising, so there’s no doubt the physical market will keep thriving in 2017,” head of Asia-Pacific property at Citi Research Oscar Choi stated at a recent conference in Hong Kong.

Clearing a Supply Glut Still Seen as a Priority

According to the bank’s analysis, the central government remains committed to providing liquidity to maintain confidence in China’s housing market while also clearing a supply glut in lower tier cities.

Choi pointed out that the central bank has not issued any forward guidance instructing banks to squeeze lending. He said, “What I have seen is five or six banks sometimes chasing one developer to offer it financing services, after land purchases. That won’t happen if they receive any internal guidance from the central bank.”

Speculation about tightening measures comes as average home prices last month rose in 64 out of 70 mainland cities surveyed by the government, with prices in Shanghai now up by 31 percent over a year ago. Sales volumes also reached a five-month high in the last week of August, jumping 93 percent amid rumors of higher down payments, although authorities have denied this.

Chairman of the China Real Estate Chamber of Commerce Hong Kong Ivan Ko shared Citi Research’s sentiment, indicating that after six interest rate cuts since 2014, liquidity remains abundant particularly in China’s property market where most mainland loans issued in July were for home mortgages.

CLSA, S&P Among the Bears

Despite these positive predictions, not all shared the same view of the good times keeping on. Hong Kong-based investments group CLSA’s head of property research Nicole Wong believes the People’s Bank of China will clamp down on lending in first and second tier cities given the rapid increase in house prices and banks’ overreliance on their mortgage business.

S&P Global Ratings also believes tightening measures are imminent and prices will decelerate after accommodative policies are rescinded.