China Real Estate Investment Climbs 9.1% as Confidence Grows

“Housing is for housing, not speculation,” said Premier Li Keqiang at the National People’s Congress, but enthusiasm for investing in Chinese property continues unabated. Data from the National Bureau of Statistics showed total investment in real estate development in the first three months of 2017 was up 9.1 percent year-on-year.

With a total real estate development investment of RMB 1.93 trillion ($280 billion) in the first three months of 2017, investment in residential buildings made up 67.3 percent, with a total of RMB 1.3 trillion ($188.5 billion).

Eastern China, which accounts for the lion’s share of all real estate investment in China, showed a 7.9 percent growth rate, but Central China showed a year-on-year increase of 14.7 percent.

New Construction and Home Prices Rise In March

The continued increase in real estate investment has meant more in the way of new projects. The National Bureau of Statistics puts the total floor space started this year at 315 million square meters, up by 11.6 percent year-on-year. More than 227 million square meters of the total new construction floor space so far in 2017 has been residential.

Real estate investment overall showed a pretty moderate increase in the growth rate of just 0.2 over the previous findings, but the increase follows months of regulations meant to cool China’s house prices in first-tier cities, which have been said to have risen more than 20 percent in the past year in first-tier cities.

Waiting for the Curbs to Kick In

Along with the continued growth of real estate investment and new construction, March data from the National Bureau of statistics indicates that China’s measures to lower housing prices have not yet had the desired effect.

In fact, the curbs themselves may have given rise to the higher numbers of real estate investment and the higher prices. A report from Bloomberg pointed out that there may have been an element of “panic buying” in March and that April could finally see these measures taking effect.

However, the findings from the NBS don’t necessarily reflect regulations from municipal authorities (or China’s central bank) that were instituted recently. More than 50 Chinese cities – from first-tier on down the line – have slapped harsh regulations on property buyers since mid-March. The stricter measures come after new home prices rose last month in 62 of the 70 cities tracked by the government, compared with 54 in February, with a moderate average rise in prices of 0.6 percent during March.

Despite the gradual climb upward, average prices in China’s largest cities have started to come down. Prices have seen declines in first-tier cities throughout China. After climbing by more than 23 percent in 2016, home prices in Shanghai declined 0.1 percent last month following, dropping from a 0.2 percent increase in February. Shenzhen, where the cost of new homes rose more than 40 percent last year also saw prices fall 0.3 percent — its sixth month in decline.

In Beijing, which has seen the harshest purchase restrictions this year among China’s largest cities, home prices increased just 0.4 percent in Beijing, but transaction volumes were down by 66 percent from a month earlier and fell 79 percent compare to March 2016.

With the curbs in mind, investors seem to have more time for China’s smaller cities; tourist towns Sanya and Haikou saw prices rise more than 2 percent month-on-month and Shenyang, Nanchang, Xiamen, Yichang and Nanchong saw price rises of more than 1 percent month-on-month.