10 predictions for China's economy in 2015
- By Zhang Rui
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E-mail China.org.cn, October 29, 2014
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Workers at a construction site in China. [File photo] |
5. The real estate market will see momentary recovery and central government control will return to normal.
The new administration of the government has a clearer control approach. For one, it will not make real estate a tool, so the policies will be kept restrained and prevent speculation demands. The full stimulus of 2009 will never appear again. On the other hand, real estate is a very important sector in China's economy, so real estate will not be "demonized." The early policies seemed "too tight" and restricted "reasonable" housing demands. Recently, approaches such as limited loan adjustment have loosened some limitations.
However, from the current status, the loosening is not clearly effective. Sales of real estate have not improved, and the year-on-year drop has enlarged even further. For one, it is because last year's base was high, for another, the new policies have not rolled out so buyers are just watching and waiting for banks' specific benefit approaches.
From the mid-term perspective, as loosening may be more relaxed, the 2015 real estate market may experience a short term recovery. First loan loosening may have a bigger influence than the loosening of the property-purchasing limitations. This will push forward real estate sales by increasing loans, lowering loan costs and lowering down payments. At the same time, banks' special financial debts and promotion of mortgage-backed securities will help reduce the banks' debt costs and increase the impetus to configure mortgages.
But the revival of housing market will mainly be measured in sales. Housing prices and development investment will not see a real pickup, due to the pressure of the high stock, continuing tightening of banks' development loans and more. This will drag down the performance of the general economy and cyclical sectors.
In the long term, when policies shift from being "too tight" to "normal," the big and unusual stimulus policies will not come out again. China's real estate market will enter a long time adjustment period under the downturn pressure of population aging, interest rate marketization, global liquidity deflation and property tax, as well as the upward motivation from urbanization and asset value increase demands.
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