The transacted area of commercial houses in major cities nationwide records a small month-on-month increase in October, representing an overall market performance better than that of September. In terms of transaction data, the transaction in October this year also surpasses that of last year with cities like Wuhan, Nanjing and Hangzhou maintaining great amount of transaction. Driven by largely decreasing supply and steadily increasing transaction, the supply-demand ratio of commercial houses in major cities drops largely in October; overall inventory waits for further improvement; digestion period continues to decrease. Boosted by favorable policies and releasing demand, large-scale real estate enterprises strive to achieve quick turnover and their performance is remarkable. Evergrande Real Estate Group announced its performance in October yesterday (Nov.2). Its total sales volume in the first 10 months of this year records 154.53 billion yuan, beating the annual goal of 150 billion yuan set at the beginning of the year in advance. It is also the first of its kind across the country to complete annual sales target in advance.
Different performance in different tiers of cities
Data provided by Cric Real Estate Information Group shows that the transaction of commercial houses in major cities in October climbs slightly month on month and their year-on-year growth is also better than the same period of last year. The performance of first-tier cities is still the strongest: both Beijing and Shenzhen record a month-on-month increase of over 20 percent in terms of transaction. Despite a small month-on-month decrease, Shanghai still sees strong demand with its transaction exceeding 1.30 million square meters.
As to second-tier and third-tier cities, the situation is mixed. Half of the cities see month-on-month growth of transaction, while half not; most of the cities see year-on-year growth of transaction. Wuhan, Chongqing Municipality, Tianjin Municipality and Nanjing show outstanding performance with their transaction all exceeding 1.20 million square meters. Especially that the transaction of Wuhan in October reaches nearly 2.50 million square meters, recording the highest single-month transaction since 2007. While for cities including Kunming, Changchun and Dalian, they all see month-on-month decrease with transactions remained at a low level.
As to the stabilization of market in October, Zhu Yiming, chief analyst of Cric, believes that there are three reasons behind that. First of all, a string of policies, including “the minimum down-payment requirement of commercial housing loans is decreased to 25 percent” at end-September, the promotion of public housing fund loans in other cities, launched in end-September will boost market confidence despite their delay in actual implementation by local governments. Secondly, it is the continuously relaxing credit policies. The new policy of minimum down-payment requirement of 40 percent for second-home buyers will be further implemented, thus rigid demand and improvement demand are stimulated. Thirdly, the explosive growth of supply and concentrated marketing in September makes more houses available in the market. With the yearend approaches, real estate enterprises will further intensify efforts in marketing under performance pressure. It is expected that the transaction will continue the climbing trend at the year end.
Due to the remarkable decline in commercial houses supply and stable growth in transaction, the commercial house supply-demand ratio in over 80 percent major cities fell and commercial house inventory dipped slightly from September in nearly 70 percent major cities in October, improving the inventory in these cities. The digestion cycle in first-tier cities experienced the biggest drop of over 30 percent on average and that in such cities with hot sales as Suzhou, Wuhan and Nanjing stayed at around 6 months. If the supply does not grow quickly, it will lead to demand exceeding supply, causing housing prices to surge steadily.
Evergrande first to achieve sales volume with RMB150 bln
Driven by the policies and releasing demand, the large-scale real estate enterprises sized opportunities to increase sales and have achieved their performance goals for 2015. According to Evergrande Real Estate Group’s October performance released on Nov. 2, its sales volume in contract posted 25.8 billion yuan in October, representing a year-on-year growth of 185 percent and an increase of 129.9 percent from previous month, and this was the highest single-month sales volume in the industry since this year. Its total sales volume reached 154.53 billion yuan in the first ten months, exceeding its annual goals of 150 billion yuan set at the beginning of the year.
Evergrande also showed prominent performance in sales area. Its sales area in contract recorded 3,282,000 square meters in October, up by 21.9 percent from a year earlier and 131.4 percent from September. Its total sales area reached 20,069,000 square meters in the first ten months of the year, making it the only housing enterprise with over 20 million square meters of housing sales area in China by now.
Cric believed that the transaction increase in October has stopped the declining trend since the second half of the year. The recovery was mainly contributed by the rising market confidence as a result of the policies. As the year-end is around the corner, the relaxing housing finance policies including commercial loans and housing accumulation funds have reduced home buyers’ financial pressure to some extent, which will stimulate some funds to enter the stock market in advance. On the other hand, although the market performed better than last year on the whole, some housing enterprises are still under the pressure from performance goals. They are expected to continue to strengthen promotion so as to make achievements at the end of the year. Therefore, sales boom may not occur again like last year, but the market is very likely to see significant recovery at year-end.
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