BOFIT Weekly Review 2015/04
Chinese real estate markets deteriorate further
Real estate sales contracted again in December. Real estate sales volume, measured in terms of floorspace, declined 8 % y-o-y. In value terms, sales fell 6 %. The NBS figures tracking sales in 70 cities indicate that, with the exception of a handful of cities in the eastern parts of the country, apartment prices declined across most of the country. Moreover, SouFun, a private portal service that tracks China’s real estate markets, reports that the average apartment price at the end of December was down about 4 % from an April high and about 3 % from a year earlier. On-year investment in the real estate sector slowed to 11 %, down from over 20 % a year earlier.
The trends on China’s real estate markets have long raised concerns among observers. Further fuelling uncertainty is the wide coverage of the financial struggles of some major real estate developers. Real estate markets have a significant effect on local governments, which earn considerable revenues from the sale of land use rights. Demand for land use rights has been hurt by the slowdown in growth of the real estate sector.