China’s 2013 New Home Sales to Exceed $1 Trillion, Record High

China’s 2013 New Home Sales to Exceed $1 Trillion, Record High

China’s new home sales last year likely exceeded $1 trillion for the first time as property prices in cities the government considers first tier surged in the absence of more nationwide property curbs.China Real Estate Information Corp., or CRIC, and Centaline Property Agency Ltd. both forecast that National Bureau of Statistics numbers to be released today will show 2013 sales topped $1 trillion. The value was 5.9 trillion yuan ($975 billion) in the first 11 months. New-home prices in December climbed 20 percent in Guangzhou and Shenzhen from a year earlier, and jumped 18 percent in Shanghai and 16 percent in Beijing, the bureau of statistics said Jan. 18.

Premier Li Keqiang hasn’t imposed additional nationwide measures to cool the market since his predecessor Wen Jiabao stepped up a three-year campaign in March, ordering higher down payments and interest rates for second-home loans in cities with “excessive fast” price gains. Instead, Li has left it up to individual cities to impose their own curbs, with at least 10, many of them provincial capitals, tightening local property policies since November.

“The effect of those measures was limited last year because in first-tier cities demand still outpaced supply,” Ding Shuang, a Hong Kong-based senior China economist with Citigroup Inc. said in a phone interview.

Shenzhen, Shanghai and Guangzhou have all raised minimum down payments for second homes to 70 percent since November.

The value of new housing sales in the January-November period last year surged 31 percent from the same period a year earlier. It was 5.4 trillion yuan in 2012, an 11 percent gain from the previous year, according to the government data.

Property Reliance

Existing-home prices rose 20 percent in the capital Beijing last month from a year earlier and increased 14 percent in Shanghai, according to the Jan. 18 data.

Private figures also showed no sign of cooling in the property market. Home prices in December had the biggest year-on-year gain in 2013, increasing 12 percent, according to SouFun Holdings Ltd. (SFUN), the nation’s biggest real estate website owner.

“There has been a misconception that China’s property curbs are aimed at cracking down on the market or squeezing sales,” said David Hong, a Hong Kong-based property analyst at CRIC, a property data and consulting firm. “The country’s economy, especially that of less affluent cities, is relying on the real estate industry.”

Artificial Tightening

First-tier cities, including Beijing and Shanghai, may impose further curbs if prices rise too fast, Standard & Poor’s Hong Kong-based analyst Bei Fu said Jan. 17. Home prices will rise about 5 percent this year from 2013, while home sales volume will jump about 10 percent, according to S&P.

Almost one-fifth of respondents in a Renmin University of China survey gave a zero score to the government’s property policies, indicating “near despair” with housing prices, the official China News Service reported last month, citing survey results.

New-home prices in the eastern city of Wenzhou in Zhejiang province fell 2.6 percent from a year earlier, declining for a 27th month, the only city among the 70 to show a decrease, the government data showed.

“The government should increase land and home supply in major cities because only artificially tightening the market through government orders will not work,” Citigroup’s Ding said.

Rising Sales

Beijing, the financial center of Shanghai, and the southern business hubs of Guangzhou and Shenzhen are considered first-tier cities by the statistics bureau. The four have “high levels of international business connectivity, deep corporate bases and well-developed international grade stock, and they are the country’s most liquid and transparent markets,” according to broker Jones Lang LaSalle Inc.

New and existing home sales in the U.S. were about $1.1 trillion last year, including $149 billion of new homes sold, broker Cushman & Wakefield Inc. estimated, based on U.S. Bureau of Census data.

China’s existing-homes market is about one-third of new homes by sales, according to Centaline, because the nation only allowed private home ownership in 1998. The government doesn’t release data on existing-home sales.

Home sales will continue to rise this year because of economic growth, supportive credit environment and government reforms including the easing of the one-child policy, said Sigrid Zialcita, head of Asia research at Cushman, in an e-mailed reply.

Home sales rose at a rate of about 30 percent each year from 1998 to 2009, according to Centaline, China’s biggest real estate brokerage. The annual rate has slowed to about 10 percent since 2010, according to the brokerage.

They won’t continue growing as fast given their already rapid increase and government curbs, said Liu Yuan, a Shanghai-based researcher at Centaline. Growth in the early 2000s was driven by tax rebates and other incentives to encourage home buying as the nation’s property market was opened to private ownership, he said.

To contact the reporter on this story: Bonnie Cao in Shanghai at bcao4@bloomberg.net