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Economy

Economy still relies on housing market

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2016-09-14 08:46Global Times Editor: Li Yan ECNS App Download

Property prices divergent in cities, but far from a meltdown: experts

Positive signs have emerged concerning China's economic growth in the first eight months of the year thanks to the robust growth in the housing market, expert said on Tuesday, but the divergent growth paths in different cities need to be further addressed.

Home prices in first- and second-tier cities have been increased rapidly in recent months, while remaining relatively stable in lower-tier cities, a divergent situation that will continue, a spokesman for the National Bureau of Statistics (NBS) said on Tuesday.

Total investment in housing market development reached 6.4 trillion yuan ($958 billion) from January to August, up 5.4 percent year-on-year, during which the investment in residential properties grew 4.8 percent, Sheng Laiyun, the spokesman for the NBS, said at a press conference Tuesday. The total sales volume of commercial properties increased 38.7 percent year-on-year, to 6.66 trillion yuan, he noted.

In addition, "we have made progress in reducing the inventory," Sheng said, noting that total commercial properties ready to sell declined by 5.12 million square meters by the end of August compared to the end of July. The inventory of commercial properties has been consecutively decreasing for six months, according to Sheng.

This strong momentum in the housing market contributes to overall economic growth, as it helps other sectors, both those related to homebuilding such as steel and cement production, and those related to consumption, for example, home appliance and electronics, Hui Jianqiang, research director with real estate information provider Beijing Zhongfangyanxie Technology Service, told the Global Times on Tuesday.

"In the short term, a booming home market is an important engine for overall economic growth," he said, noting that, at the same time, more work should be done in economic restructuring by introducing new engines through encouraging entrepreneurship or highlighting new technologies, which will ensure that the economy is in a "health" status in the long run.

The housing market has become a pillar of the country's economic growth, as the total investment in this sector as well as those in related industries accounts for over 40 percent of the total volume of fixed-assets investment, Liu Xuezhi, an analyst at Bank of Communication, told the Global Time on Tuesday.

Industrial output and consumption have also shown positive trends, growing 6.3 percent and 10.6 percent, up 0.3 and 0.4 percentage points compared to July, respectively, Liu noted.

"For more sustainable growth in the medium and long term, the economy is expected to reduce its dependence on the housing market and let other sectors play bigger roles," he said.

Divergent markets

The home prices vary significantly among first- second- and lower-tier cities due to restrictions on home purchases, Liu noted.

This divergent situation in the housing market also reflects an imbalance of resources, experts told the Global Times after the press conference.

The average compound annual rate in first-tier cities in the first half of 2016 was estimated at 12.8 percent, 7.62 percentage points higher than the same period in 2015, according to a report issued by the China Academy Index in July. The rates in second-tier cities and third- tier cities were 5.33 percent and 4.27 percent, respectively, the report showed.

Home prices in first- and second-tier cities have mainly been driven by growing demand, as people are migrating to those cities for a better living environment and more working opportunities, noted Yan Yuejin, research director at E-house China R&D Institute.

"Lower-tier cities neighboring bigger cities have also seen progress in reducing inventory, but demand remained sluggish in some third- and fourth-tier cities that record slow economic growth," Yan said.

Despite the fact that home prices are growing rapidly in both first- and second-tier cities, a strong demand from different home buyers as well as the government's continued effort to crackdown on speculative activities that may create housing bubbles will prevent a meltdown in the market, Hui said.

The emerging middle class in first-tier cities like Beijing and Shanghai can buy homes through various ways, including with a down payment or home insurance.

Meanwhile commercial property remains affordable for a large number of consumers, Hui added.

"But authorities will have to intervene if home prices soar 20 percent every year, which will be too high," he said.

  

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