Date
12 December 2017
Fitch Ratings' Andy Chang expects demand in first-tier mainland cities to stay high
Fitch Ratings' Andy Chang expects demand in first-tier mainland cities to stay high

High demand to buoy property prices in top cities, Fitch says

Strong demand from end-users will continue to put upward pressure on property prices in top-tier mainland cities, including Beijing, Shanghai, Guangzhou and Shenzhen, Fitch Ratings said Thursday.

“The demand from homebuyers in first-tier cities remains high, especially in prime areas,” Andy Chang, associate director in Asia-Pacific Corporates at Fitch Ratings, said.

Following Premier Li Keqiang’s {李克強} call at the National People’s Congress last week, the authorities in first-tier cities are expected to step up efforts to boost land supply through urban renewal. Chang said the policy will help ease a lack of supply in those areas.

Due to limited land supply, property developers now have to pay 30 to 50 percent more for land than they did several years ago and some are struggling under the added pressure on their capital gearing, Chang said. But, some medium-sized property developers such as Guangzhou G&F Properties Co. Ltd. (02777.HK) will do better because they have enough land for their projects.

Chang said the central government is in the early stages of implementing some long-term mechanisms — like broad-based property taxes, social housing and agricultural land reform — but those measures are not likely to have any meaningful impact on the market in the short term.

He said property prices in third- and fourth-tier cities are likely to remain weak due to oversupply. These cities have not benefited much from the run-up in prices experienced by large cities, he said.

Fitch maintains a stable outlook for the country’s property sector. Property developers’ sales volume by area is expected to grow 5 to 10 percent this year, compared with 12 percent growth last year, it said.

– Contact the reporter at [email protected]

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