China for purchasing property overseas could be longer lasting and impact demand in the short term, for six to twelve months.
Getting capital out of China is becoming progressively difficult. Beijing’ s anti-corruption movement has slowed down high rollers’ capital transfer through casinos in Macau, one of the routes for money transfer, and has even investigated overseas accounts and limited ATM withdrawals overseas. Chinese stock markets remain unnerved; the Shanghai index has lost 45 % of its value since its peak on 12 June 2015. More policy is expected to tighten capital flow. The desire to buy in liquid overseas markets is strong but the cash may not be available. However, in the medium term the Chinese middle class is still very wealthy and eager to spend.“ The [ Chinese ] markets have nothing to do with the economy... it’ s like trying to read an economy based on how well a casino is going,” Think Global China business trend expert David Thomas has said.
If demand for overseas property falls temporarily, it is likely that only lower-priced properties such as apartments would be affected but not the luxury market. Investors will begin to reconsider property as the current stock market instability will have a lot of investors looking for a safer and less volatile investment and real estate markets will benefit from this. According to Chinese law, individuals can take a maximum of US $ 50 000( R768 000) out of the country. Chinese banks that once looked away when investors transferred money to outside China are now scrupulously applying rules about the transfer of capital overseas. This means fewer Chinese buyers can get enough money out of the country to buy real estate. Investors who sold at the share market’ s peak became yuan millionaires, but those who held on have lost much of their wealth.
Only a small proportion of Chinese investors managed to liquidate their assets before the crash and clampdown. But a small percentage of China’ s share market is still a vast number of investors. Families could also team up to circumvent the US $ 50 000 foreign investment limit. Those who managed to get out of China before the rout are looking for a safe haven which is resilient to any downturn. Chinese students are also buying, with the expectation that they and their parents will emigrate permanently in the next few years.
2016 Predictions Policymakers in Beijing in 2015 cranked up their efforts to ease earlier restrictions on the property market after a sharp downturn in 2014 raised concerns that China’ s economy could face a hard landing. The government cut interest rates, allowed people to buy multiple homes, and granted developers access to China’ s onshore bond markets. That led to surprisingly strong sales— but will the momentum continue?
What happened in China’ s housing market along with other areas of its troubled economy was“ the big news to South Africa’ s economy and thus its own residential market’
Housing Sales Growth Could Slow Nationwide housing sales could slow to a more modest 0 %-5 % in 2016 as the effect of supportive monetary and regulatory policies will taper off, according to Moody’ s Investor Services. Housing sales by value are likely to increase more than 10 % this year. Official data showed housing sales grew 18 % in the first ten months of 2015 from the same period in 2014.
Policymakers Will Roll Out Further Supportive Measures With real estate investment still sluggish despite an improvement in sales, Beijing remains compelled to provide policy support to the market. Economists expect further interest rate cuts, after six reductions since late 2014; lower down-payment rates; tax rebates for homebuyers; land reforms; and liberalized household registration policies.
The Outlook for Home Prices is Shaky The uptick in sales and home prices has been driven largely by China’ s biggest cities, and stable income growth could provide some support over the first six months of 2016. But there remains a risk of overheating. The National Academy of Economic Strategy, a unit of the Chinese Academy of Social Sciences think tank, said in a report that in some cities where prices have run up, there is a risk that prices might“ fall off a cliff” in the second half next year.
Construction Starts Could Show a Third Straight Year of Decline Homebuyers would have to work through the buildup of unsold housing for another year before inventories normalize, according to Rosealea Yao, an analyst at GaveKal Dragonomics. Housing starts were down 15.3 % in the first eleven months of 2015, compared to the 14.4 % decline recorded for the whole of 2014.
14 MAY 2016 SA Real Estate Investor www. reimag. co. za