China’s best known think tank says that the country’s property market will bounce back from its current slump sometime in the second half of 2015, and in a new report the Chinese Academy of Social Sciences (CASS) even suggests a few ideas on how the recovery will happen.
Before that rebound occurs, however, there will still be some hard months ahead for the real estate sector.
According to the 2014-2015 Green Book for Residential Housing, which was published by CASS late last week, due to a reversal of earlier policies designed to cool down China’s once raging housing market, demand for new homes should start to recover, and bring prices with it, sometime after June next year.
Prices to Fall Five Percent More
Although China’s home prices have already been sliding for more than seven months, the CASS report says that the slump still has not hit bottom. The think tank foresees an average five percent drop in home prices across the country in 2015, and annual sales are expected to fall by 12 percent.
According to figures from the National Bureau of Statistics and Mingtiandi, home sales in China fell 9.7 percent during the first 11 months of 2014, compared to the same period last year.
Home Purchase Restrictions to Fade From Big Cities
Although home purchase restrictions, which were put in place starting in 2010, have now been lifted in most of China’s largest cities, they still remain largely in effect in Beijing, Shanghai, Guangzhou, Shenzhen and Sanya.
However, the government may be ready to loosen up on these remaining markets, especially after prices have fallen there for several consecutive months.
“The first- and second-tier cities have entered a relatively oversupply period. Home prices would continue to drop and restrictions are expected to be eased completely,” Zou Linhua, a researcher with the National Academy of Economic Strategy – a division of CASS – was quoted as saying in the China Daily.
With home prices still sliding in these major markets, as well as in most second and third tier cities, CASS predicts that the home purchase restrictions will be gradually phased out in these five cities, leading to a gradual market recovery and avoiding a hard landing for the housing market.
During November Shanghai already took steps to loosen restrictions on home sales by redefining what qualifies as “luxury” housing. By allowing homes up to 140 square metres in area to be classified as “standard,” the city made it much easier for buyers to finance purchases of larger homes.
CASS Speaks on Behalf of the Government
While reports by think tanks in other markets may be seen as representing the views of the academics and scholars who work there, CASS is affiliated with China’s State Council – the equivalent of the nation’s cabinet – so its safe to assume that the organisation’s predictions and views are in line with at least some senior members of the government.
CASS also pointed out in its report that there are several other measures available to the government to help stoke demand, including loosening up mortgage credit, lowering taxes on housing transactions and purchasing surplus houses for other uses.