According to a recent research report by Vigers Asia Pacific,
since China's authorities took steps to cool the nation's
real-estate market in 2004, the market recently has shown slowdown
in the growth of real estate investment demands, hinting towards a
stabilization in price rise.
The report showed during the first quarter of 2007, Grade-A
office rent in Beijing, Shanghai and Shenzhen rose by 1.1 percent,
8.2 percent and 7.7 percent respectively. The sales market recorded
average price rises of 4.3 percent, 11 percent and 15.6 percent
respectively.
According to Mr Kenny Suen, Managing Director of Vigers Asia
Pacific, "The average GDP growth in this quarter in the above three
cities exceeded 12 percent, almost doubling than that of Hong Kong.
Quarter on quarter rental growth in these locations has achieved
level in the range of 0.6 percent - 2.7 percent (See Table 1).
Scrutiny of the Government's anti-speculation policy has
resulted in such observations. Taking a macro view, Suen predicts
stable 2007 - 2008 GDP growth in the range of 9.7 percent. "A more
regulated macro economic environment will further stabilize the
development of the property sector."
Mr Raymond Ho, Executive Director of Vigers Appraisal and
Consulting – China Operation also shares the optimism of the
effectiveness of the measures on the property market in the bottom
half of the year. He reasoned that "There was some blind and
reckless atmosphere in the market, and since the government's
tightening up, the sentiment tended to be wait-and-see."
"Since the start of 2004, hyper-investment is encouraging a
frenzy of construction and expanding skylines. Chinese government
sought to curb buildings' excess. Tightened capital fund and lower
expectations on price rise slowed the construction rate of the
office projects, leaving a massive size of under-construction
projects. However, restricted by the fixed construction cycle,
developers have to expedite the construction works in the following
months, which will boost the supply and thereafter lower the price
growth."
Suen believes administrative -- rather than market -- measures
still are the country's best bet to regulate its economy.
"Currently, the government's administrative decisions have shown
effect in curbing the acceleration. Guided by the policy, Grade-A
office price increase, for instance, will decelerate to around 5 –
10 percent by year-end, compared with over 10 percent price growth
from 2005 to 2006" he said.
Table 1 Asian Cities Prime Office % Change vs GDP
Growth
|
Cities
|
GDP Growth
(1st Quarter, 07)
|
Prime Office Quarter on Quarter
Rental Growth
(1st Quarter, 07)
|
|
Beijing
|
11.9%
|
0.6%
|
|
Shanghai
|
12.9%
|
2.7%
|
|
Shenzhen
|
12.7%
|
2.7%
|
|
Hong Kong
|
7.0% (4th Quarter, 06)
|
1.6%
|
|
Singapore
|
6%
|
26%
|
|
Tokyo
|
0.7%
|
4.1%
|
(China.org.cn May 11, 2007)