Low quality property developers improve market by leaving
Global Business, Yu Wen
Nearly 300 property developers in China have exited the market as of last week. According to an online platform run by the national judicial system, almost 60 percent of all real estate companies shutdown in 2018.
Experts say home buyers can now expect a healthier property market as a result. Most of the companies which went broke were small and medium sized firms, located in third and fourth tier cities.
One expert expects that the property markets in lower tier cities will face more downward pressure in the second half, and several developers have already altered their focus from lower tier cities to the first and second tier.
Aubrey Qu, research analyst at CBRE China, said that due to the limited population and housing growth, tier 3 and 4 cities may face a lot of challenges in improving transactions and prices.
Qu also explained that, "according to our data, the total transacted floor areas in 300 cities softened by 1.5 percent. However, we found that the land transaction in the top 10 cities nationwide is up 60 percent, with 70 million square meters, which shows that prices and transactions in tier 1 and 2 cities will remain favorable."
In addition to shrinking demand in lower tier cities, the real estate industry has been hit by new financial tightening policies that have made it more difficult for developers to get loans. And in April, several cities imposed additional purchase restrictions on apartments, stressing again that "housing is for living not for speculation."
All of that has acted to cool the previously over-heated property market. Land purchase transactions in the first six months were down 27 percent year-on-year, and the total transaction volume also dropped 27 percent for the same period.
"The household property market has cooled due to the tightening policies, and the expansion of commercial property has also slowed, all because of the overall environment," said Yan Yuejin, chief research officer at E-House China R&D Institute.
"For example, the market for shared offices and long-term lease apartments is now less heated. If monetary and fiscal policies are loosened in the second half, that might give more opportunities for entrepreneurs. Plus the free trade zones in some cities and their need to attract employees could also boost the need for office buildings." Yan concluded.