Housing market gains momentum in second-tier cities

2016-04-05 08:51Global Times Editor: Li Yan

Experts call for supportive policies to sustain rebound

The rebound in the real estate market in China's second-tier cities offers a good opportunity for local governments to reduce inventory, experts said on Monday, while noting that more supportive policies are needed to sustain the upturn.

The real estate market has witnessed a number of new trends in China's second-tier cities, most of which are provincial capitals. In the latest development, the housing provident fund quotas have reached the saturation point in many second-tier cities of the country, including Nanjing and Suzhou in East China's Jiangsu Province, reported Monday.

The utilization rate of employees' housing provident fund in cities such as Nanjing and Suzhou has reached as high as 100 percent, far beyond the 85 percent warning level set by the central bank.

Moreover, the real estate market in the second-tier cities has witnessed robust trading. The transactions for newly built commercial housing in the second-tier cities in March rose by 96.4 percent year-on-year, higher than the 73.5 percent increase in the first-tier cities, according to a report released Friday by Shanghai-based E-house China R&D Institute.

Besides, there are also signs of increase in housing prices in some second-tiers cities.

"These trends do show that there is a recovery in the real estate market in some of China's second-tier cities," Shi Liang, general manager with Shanghai Zhigo Asset Management Co, told the Global Times Monday.

Shi's view was echoed by an expert surnamed Huang, a veteran industry insider with one of China's largest real estate information providers.

But Huang noted that it is still a weak recovery limited to some second-tier cities, especially cities close to first-tier cities, and "not a comprehensive rebound in all second-tier cities."

Demand spillover

Both Shi and Huang noted that the main reason for the recovery in the second-tier cities is that these cities have absorbed the surplus demand from the first-tier cities, where local governments recently put in place a series of restrictions on housing purchase.

"So some rigid demand for housing was diverted to the second-tier cities," Huang told the Global Times on Monday.

"Besides, some of the investment capital that was targeted at the first-tier cities also shifted to the second-tier cities due to the purchase restrictions in the first-tier cities such as Shanghai and Shenzhen [in South China's Guangdong Province]," Shi noted.

Though house prices in the second-tier cities are seen rising, experts noted that the rate of increase will not be high.

Huang said he was not sure how long the recovery could last, "It is too early to reach a definite conclusion."

Need for favorable policies

The recovery is a good opportunity for municipal governments in the second-tier cities to reduce their inventory, Huang noted.

Data from the National Bureau of Statistics showed that the country's residential housing supply by area reached 452.48 million square kilometers by the end of 2015, up 11.2 percent year-on-year.

Though destocking is a key priority in the third- and fourth-tier cities, Shi noted that cutting house inventories is also beneficial for the second-tier cities. "This can help the second-tier cities boost local industries," Shi said.

As for the tight housing provident fund situation in the second-tier cities, which will inevitably restrict the citizen's ability to buy a house, Huang noted that local authorities should roll out more supportive policies such as speeding up reviews of housing provident fund loans, encouraging local commercial banks to adopt preferential mortgage policies for homebuyers and reducing transaction taxes and fees for unsold houses.

"This can help them invigorate real estate transactions and reduce inventory," said Huang.

The central government has adopted a differentiated approach to regulating the housing market in different parts of the country, according to an article posted on the central government's website on Thursday.

"The target for the central government is to ensure a benign and modestly rising property market, which can help boost China's economy," Huang noted.


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