Home prices spurring a panic or patience?

Property prices across China's first-tier cities have cooled in recent times, a reflection of the cooling in the Chinese economy overall. There will not be any price crash in first-tier cities, merely a cooling, followed by far more modest gains from now on.

But recent price panics in more and more of China's second- and third-tier cities don't signal the start of any bubble-bursting process generally.

Rather, they're a welcome reminder of the chasm in development levels between first-tier cities and beyond. Far too many new homes have been built outside first-tier cities, and foolish attempts have been made to piggyback on first-tier city prices when the economic opportunities and infrastructure both fall woefully short.

China goes local to soften hit from property downturn

Cooling property sector in focus as economy slows

As a result, there may be more quite massive reductions in the prices of new homes in many second- and third-tier cities, especially those that do not benefit from relatively close geographical proximity to China's first-tier cities. There will also almost certainly be a quite substantial cut in investment into and construction of more new homes in many second- and third-tier cities.

But ... there will not be a major nationwide property crash similar to those witnessed recently in the United States and not that long ago in the United Kingdom.

First-tier city property prices will remain robust and in the more select areas of these cities, prices may even rise significantly and relentlessly, not too dissimilar to the seemingly unstoppable rise in London property prices while the rest of the UK market remains fairly flat.

All future analysis of China's property "market" should first pay sufficient attention to the presence of very different segments: currently key variables being city income and infrastructure.

Expect greater fragmentation of China's property market with smaller and smaller market segments defined by smaller and smaller geographical areas.

No need for any nationwide property price panic. But there is a need for studious segmentation, strategic thinking and more modest economic expectations.

The author is a visiting professor at the University of International Business and Economics in Beijing and a senior lecturer on marketing at Southampton Solent University's School of Business. The views do not necessarily reflect those of China Daily.

 

Previous Page 1 2 Next Page

Previous Page 1 2 Next Page