It's A Home Buyer's Market In China, Says CBRE

Source : The Business Times, April 9, 2009

It sees pressure on China office rentals, says mass market has bottomed in HK

(HONG KONG) China's residential property is 'a buyer's market' after prices fell from last year's peak levels, Chris Brooke, CB Richard Ellis Group chief executive officer for Greater China, said in a Bloomberg Television interview yesterday.

Plenty in Pudong: 'There's particularly tremendous volume in supply coming on, particularly Pudong in Shanghai and the central business district in Beijing. That is putting a lot of downside pressure on rentals,' according to Mr Brooke

On higher first-quarter home sales in China: 'There was a lot of pent-up demand from 2008 from first-time buyers who have been holding out and waiting for prices to come off a bit. Transaction volumes were significantly up since the Chinese New Year. The issue is going to be how sustainable is that into the second quarter. There's a lot of competitive pricing going on. In some cities, there is still quite a lot of inventory to be moved. Depends on the city, could be six months or 12 months. I think we will continue to see developers cutting prices. It is definitely a buyer's market. The developers are leading the charge in terms of the discounts.'

On China's office market: 'There's particularly tremendous volume in supply coming on, particularly Pudong in Shanghai and the central business district in Beijing. That is putting a lot of downside pressure on rentals. We'll see the residential market probably recovering ahead of the office sector.'

On resort prices in the southern city of Hainan: 'The Hainan sales have been very strong. There are high net-worth individuals in China looking for a holiday home.'

On home prices in other Chinese cities: 'Guangzhou and Shenzhen have come off 40 per cent in terms of residential pricing; the general view is those markets are bottoming out. In Wuhan, Shenyang, they were at a much lower base, and so haven't come off as much.'

On office market in Japan, Hong Kong and Singapore: 'In Tokyo, Hong Kong and Singapore, there are challenges in terms of attracting demand and high vacancy rates. In Hong Kong, there is a lot of pressure in Central on rents; Singapore as well. In Tokyo, vacancy was very low but rentals are coming down.'

On Hong Kong's home market: 'The mass market has sort of found its bottom. In the mid-market, there's also competition among developers with pricing. The mass market's probably found a level now that's not necessarily bottomed out but which is comfortable. Mortgages are more attractive and that is going to attract first-time buyers back into the market.'

On Hong Kong's luxury home market: 'In the luxury market, the high net-worth individuals who don't need to borrow see this as a good opportunity, as prices have come off 40 per cent to 50 per cent, so it's a good time to get in. We have seen a few more transactions in the first quarter but not the sort of price levels that we've seen before. We've seen a couple of good launches, so there's clearly demand in that area. At the very high end, people are adopting a wait-and-see attitude.'

On Singapore: 'The Singapore market faces a number of challenges driven by financial services, exports and tourism. The office market there was slightly protected last year due to limited supply. There's a lot of new supply coming on so we see more pressure on rentals. We've probably bottomed out in the mass market.' - Bloomberg