China Housing Forecast 2017

It feels like it was just yesterday when I posted the note on our 2016 forecast (over a year ago). In hindsight, housing markets in China in 2016 clearly exceeded almost all expectations held at the beginning of last year.

Now, what will 2017 bring?

First, some top-level data for 2016 for new home sales markets. House prices in major 70 cities as measured by NBS (National Bureau of Statistics) indices were +12.4% overall, ranging from +46% to -3%, sales volumes in gross floor area +22.4% at the national level. New residential construction starts +8.7% but land sales area -3.4%. That's based on the official stats.

As the housing and related credit policy tightening cycle (though still targeted at specific cities/markets) kicked off in full with the wave of late September / early October home purchase restrictions and subsequently spread to more cities, the policy makers sent a clear message in December that 'housing is for living not for speculation'. The prevailing sentiment among foreign and domestic analysts is that 2017 should be a down-cycle, especially vs high base in 2016. But does it mean really 'down' or 'less up', or how much down before the next easing cycle would kick in? Or is this time really different from previous up-down cycles in the past 10 years or so?

A few weeks ago, at our 5th Annual China Property Outlook seminar with some of the leading players in the market, we asked the participants to .. draw what they thought would happen to a specific metric (year-on-year change in 100 cities house price index from SouFun CREIS) month-by-month throughout 2017. Here's the rough result:

The 'scribblings' do demonstrate that there is no lack of diversity in views on what the 2017 will bring...

Our headline level view is -8% by the year end (on the same metric as above, different from NBS), with national sales volumes to come down by 20%, and flat new starts.

Divergence of performance and rotation among the cities will continue as the major themes.

Robert Ciemniak is the Founder-CEO of Real Estate Foresight, an independent analytics firm based in Hong Kong.