Business / Industries

Divergence key theme of China's property market

By Zheng Yangpeng (China Daily) Updated: 2015-02-12 08:29

"Land in first-tier cities was auctioned at high premiums, while most land in third-and fourth-tier cities was sold at the floor price, which clearly shows developers' outlook," said Andy Chang, a Hong Kong-based realty analyst with global credit ratings agency Fitch Ratings Inc.

"We maintain our forecast that the largest demand will derive from first-tier cities and a few key second-tier cities," Chang said.

He said that in third-and fourth-tier cities, most households already own two to four houses, leaving them with little incentive to buy more, especially since housing prices are no longer a one-way bet.

When most cities that had imposed restrictions on multiple-home purchases scrapped them in mid-2014 in an effort to reverse falling transactions, sales in lower-tier cities only rebounded briefly before faltering again.

Huang said that an acute problem faced by many third-and fourth-tier cities is that when rural residents in a province have the opportunity to move to a city and buy a home, they tend to skip cities near their villages and go directly to the provincial capital.

"Meanwhile, local governments in those small cities have sold massive volumes of land. The supply obviously exceeded demand. Local governments prefer to build a new city, which means huge amounts of new land sales, instead of redeveloping old urban areas, which is much more expensive," Huang said.

 

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