Growth In China Property Prices More Sustainable

Source : The Business Times, May 1, 2008

Measures to cool the market are working, says CBRE

FOLLOWING a slew of measures to cool the property market in China, property prices are now more sustainable.

Saying that the measures - which include capital gains tax - have 'generally worked well', CB Richard Ellis (CBRE) president and CEO (Greater China) Chris Brooke added: 'There will always be some fine tuning in specific markets but generally the measures have created a more sustainable market.'

Mr Brooke: Chinese govt comfortable with an annual growth rate of 5 to 10 per cent for the property market

Mr Brooke also believes that prices have mostly been corrected. 'I don't think we will see prices going down although I don't think the rates of growth will be like that seen in 2006 and 2007,' he added.

'I believe the government's objective is to achieve sustainable growth and if you see what the government has been saying in public, I think they will be comfortable with an annual growth rate of 5 to 10 per cent because it is in line with inflation, GDP growth and it will create wealth for the individual. So prices will continue to rise with GDP growth and inflation.'

Mr Brooke also believes that with continued market volatility, especially in the equities market, investors are more likely to divert cash into real estate. 'There are not many investment products available in China,' he added.

The Chinese residential market is a large one.

According to the CBRE's Market View report of the property market in China for the first quarter, quoted prices in the luxury residential market in the North China city of Beijing did drop 3.4 per cent quarteron-quarter after the dramatic growth in 2007, while prices sustained steady increases in Tianjin, Dalian and Qingdao.

CBRE also noted that in East China, which includes Shanghai, there has not been a downward correction in luxury home prices, although the growth rate has slowed. Luxury apartment prices increased by 2.2 per cent in Shanghai.

In South China, luxury residential prices did slip in Guangzhou, Shenzhen and Xiamen this quarter as further macroeconomic controls went into effect. In Guangzhou, luxury apartment prices fell 2.8 per cent.

In Chengdu, sales prices of luxury apartments remained stable.

In the first quarter of 2008, the office sector in major cities in North China, including Beijing, Tianjin, Dalian witnessed an upward trend in the prime office market, with the average rental increasing slightly.

In East China, which includes Shanghai and Nanjing, all the major urban markets (except Ningbo) achieved positive rental growth, while the growth rates of Hangzhou and Nanjing accelerated.

In South China, high-quality office space in Shenzhen continued to be taken up by MNC tenants.