The National Bureau of Statistics (NBS) reports China’s national real estate index was 104.07 in April, a decline of 0.65 point from March. But the index was up 1.42 points from a year earlier.

Still, it is slipping if not quite so quickly as to cast doom and despondency on all players.

The index for investment in property development was 104.28 in April, down 0.20 point from March but up 2.11 points from a year earlier. Slippage again.

About RMB695.2 billion ($99.3 billion) went into real estate development nationwide in the first four months of this year and that is up 32.1% year-on-year. Investment in housing construction increased by 35.2% to RMB494.4 billion, including RMB18.6 billion in low-income housing. That is up 24.7%.

The January-April period saw 80.65 million square meters of land developed nationwide by the real estate sector, up 5.9% on the same period of last year which is an increase but nothing like the massive increases we have seen in recent times past.

Between January and April, 1.79 billion square meters of real estate was being constructed nationwide, up 25.4% year-on-year.

So take a very short period and the tendency is either down or slightly up. The longer the period you use for examination the more bullish it appears. The shorter the period, the more bearish which is a word to indicate downwards. These are not panic figures. But they are not figures which will bring happiness and contenment to all real estate investors.
Source: China View

China´s rapid property growth is showing signs that it may be about to slow down, the Chinese Academy of Social Sciences (CASS) (seen in our illustration) has claimed.

According to Xinhua news agency, the pace of property price growth in 2008 is expected to slow but will stop short of going into reverse.

CASS has claimed, in its annual report on the real estate sector, that the reduction in growth will be felt across the country and that prices rises will eventually settle ‘far below’ that of last year.

The drop off in growth is believed to be in part due to a range of initiatives implemented by the Chinese government in an attempt to reduce speculation. The moves, the report said, are, according to the report, ‘gradually restoring rationality to real-estate demand.’

The NDRC earlier said property prices rose 10.7% year-on-year in March, compared with 10.9% growth in February.
Source: Asia Property Report

Directly below this article is a story of Vanke blasting along making profits galore. This is not an universal story. Some local developers in China are feeling the pinch from tighter lending standards and the swing from a seller’s to a buyer’s market.

There may only be a tenuous connection with the American sub-prime problems — loans you would never give unless you were barking mad — but the problem is similar in that money is tight and loans are difficult to get on something which has any element of risk. The banks want not just belt and braces as security but also a touch of super-glue.

Few analysts expect an all-out housing crash (remember it was analysts who murmured not a word about the sub-prime crisis when the savvy operators started bailing out well over a year ago).

However, analysts (a bit devalued at the moment) say, the day of reckoning could be at hand for hundreds, even thousands, of smaller developers that leveraged up on land purchases and expanded into new geographic areas amid easy credit.

Flush with cash from sales and pre-sales of yet-to-be-built projects many developers exercised their ambitions at just the wrong time. That is a pretty frightening scenario outlined by Market Watch.

Bei Fu, an analyst of corporate and infrastructure rating with Standard & Poor’s in Hong Kong said, ‘This is going to be a volatile year for players in the sector. The funding channel has tightened significantly since last year.’

Times changed in the fourth quarter last year as the government stepped up austerity measures to cool speculation. What emerged, analysts say, was a double-squeeze.

Banks cut back on lending to developers and home buyers alike as the People’s Bank of China lifted the ratio of deposits that must be set must aside as reserves. Additional measures saw tightened mortgage lending to second-home buyers and new rules that block developers from using bank loans to finance land purchases. The government also tightened controls over the banking system to make it more difficult for developers to use funds from presales of projects to aid expansion.

Funding from the stock market dried up as regulators delayed listing approvals in a bid to make it harder to raise capital. Companies have effectively been shutout from fund raising on bond and equity markets since markets in Hong Kong and China peaked last October.

Life, indeed, for the developer without access to funds is far from grand. China’s real estate markets may have missed the massive declines seen elsewhere around the globe, but conditions in its 70 major cities have cooled sharply since the fourth quarter.

Vanke, in the story above, is one of the major companies which can easily weather this slight storm. But even Vanke will be giving an extra-careful evaluation of each new project.
Source: MarketWatch

BusinessWeek makes the suggestion that property investment is no longer the sure and certain road to riches in China.

Even after the private housing revolution of the mid-1990s, when many individuals bought flats at knock-down prices from their work units, property owners had no legal means of protecting their homes.

Last year’s property rights law supposedly changed all that and, according to the Chinese Academy of Social Sciences, a remarkable 80% of urban Chinese households now own their homes.

Property prices have risen rapidly. According to the latest figures, prices in the 70 major cities measured by the government’s property index are growing annually at around 11% although prices at the top end are rising much faster than that.

Two years ago, an apartment in Beijing’s Central Park, one of the capital’s smartest addresses, could be had for around US$2,000 per square meter. Now you would be lucky to get it for US$5,000, while the penthouse apartments cost over US$9,000.

High-end property developers, speculators and the banks that finance the deals have made a fortune, but there are signs that the easy money could be coming to an end.

Stricter controls on property speculation and land-hoarding and the government’s credit squeeze is already hitting developers.

In Beijing, strict loan quotas have succeeded in cutting off credit to all but a handful of the biggest and best-connected developers, which can now only secure loans priced at 10% above the nominal interest rate.

Bigger developers have also been hit by the global credit crunch, cancelling bond issuances as demand from foreign investors has dried up.

Shares in developers like Country Garden and Greentown are nearly 50% off their autumn peaks.

Rising inflation, higher interest rates and tumbling stocks are likely to make banks more cautious about their exposure to the property sector, which accounts for one-third of their loan books.

The banking regulator recently warned banks to step up controls on lending to developers amid fears that unsustainable property prices may trigger a rebound in bad loans. According to the Shanghai regulator, US$280 million in property loans went sour last year, twice the number in 2006.

China Construction Bank, the country’s biggest mortgage lender, reckons that a 10% drop in the market should cause no major problems, but a 20-30% drop would be very tough for the country’s still fragile banking sector to handle. And, there are some suggestions that it may come to that.
Source: BusinessWeek

This is called on other, lesser, sites as stating the bleeding obvious. China’s top economic planner has released a report emphasizing the upward pressure for the country’s housing prices.

Quite so. Never have thought of it if it had not been spelled out.

Analysts (remember they were the ones who did NOT forecast the sub-prime slump in the United States) said this might spell further macro-control to prevent the sector overheating.

Despite a minor slow-down in price increases over the first quarter, a National Development and Reform Commission (NDRC) said prices were likely to rebound after a period of adjustment in some cities while overall housing prices nationwide would continue to increase on a modest scale.

There are few who would argue with that.

At the high-profile Boao Forum for Asia earlier this month in Hainan Province, economists and executives recognized 2008 as ‘nothing but a quiet year’ which is probably a polite way of saying we are not certain what will happen.

Hong Yuan Securities real estate analyst Yang Guohua agreed with the official assessment, calling the report ‘fairly objective and credible’.

Despite the snow disruption earlier this year and the declining trade surplus, the Chinese economy still grew 10.6% in the first quarter, a slight decline from 11.7% in the same period last year.
Source: China View