Watch what happens when finance restrictions are lifted
By now most real estate investors have learned that China’s macroeconomic performance in 2012’s first quarter was disappointing, and it’s also clear that the restrictions on residential real estate are going to be around for a while yet. Which is why 2012 will be the best of times for China’s property investors.
You just shouldn’t be investing in residential real estate. Then again, if you are a serious investor, you probably stopped doing that in 2010 anyway.
Already in March the government has reacted to the threat of a potential hard landing by lowering reserve ratios and encouraging more lending. This is because with the ongoing uncertainty in Europe, and with the US still not having recovered from the crisis of 2008-2009, it’s clear that China can’t count on exporting its way out of any slump. Just look at the figures — in 2012 Q1 China had a surplus of $1.2 billion compared to $46.5 billion in the same period of 2007. Exports won’t get it done.
And the government has gone far out of it’s way to point out that the lid is still on residential investment. Just ask the local governments in Wuhu or Shanghai who tried to let some light back into these markets.
So the government’s tools for encouraging economic growth for the rest of this year centre on making it easier to invest in everything except residential real estate. This means easier credit for office projects, mall developments, and maybe even the odd distribution centre.
As recently as April 12th, China’s State Council pledged prepare policy tools to cope with economic challenges, according to a government statement that summarized a meeting chaired by Premier Wen Jiabao.
According to the statement, China’s domestic economic expansion faces “downward pressures,” in response to which the government pledged to “maintain an appropriate level of investment.”
The statement further pointed out that macro policies leave the government with “relatively large room to maneuver,” which notably omitted the usual pledges to maintain “prudent” monetary policy and “proactive” fiscal policy.
So 2012 will be a great time to secure financing for your next real estate investment. Just as long as it’s not a residential development.
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