China’s property prices keep falling but remain high

The long-feared real estate bubble burst seems increasingly unlikely to happen in China. For the ninth month in a row, property prices in China continued to decline, falling by 5.1% this year. However, this decline seems to be more and more uneven depending on the cities.

real estate shanghai

Construction site facing the new CBD of Pudong, Shanghai.

If we look more closely, prices fell in 64 of the 70 cities monitored by the National Bureau of Statistics. There were 66 of them last year, revealing a slight price recovery.

The easier access to credit seems to be the key to renewing consumers interest in new homes. Indeed, the recovery came after implementing new credit policy that lowered interest rates and allowed to end twelve months of decline. Thus, Shenzhen, located near Hong Kong was the first of China’s major cities to see a slight prices rise (+ 0.3%) in December 2014. The former Special Economic Zone has been followed in by Ganzhou, a city in Jiangxi province (South-East) where prices increased by 0.2% in January.

Fragile recovery

However, this recovery still seems fragile as prices remain generally stable, especially in large cities. In Beijing, prices dropped by 0.1% in February, as compared to 0.2% in January. As for Shanghai, prices have not varied from month to month, the first time after eight consecutive months of decline. The recovery of Shanghai real estate market still needs to be confirmed with a sustainable price stabilization. Even though China has progressed toward market liberalization last year by lifting controls on purchase and lowering the interest rates, these measures don’t have enough impact to revive the real estate market. Sales, new construction sites and prices are all down.

The situation is similar for already existing properties. Surveys show that prices fell last month in 61 cities compared to the previous month, one more than the total recorded in December. They increased in 6 cities, as compared to 8 in December.

According to an independent study released on Saturday March 7th 2015, the average price of a new home in 100 Chinese cities among the largest of the country fell by 0.25% in February compared to January, to 10540 Yuan ($ 1685) per square meter. According to the China Index Academy firm that conducted the study, prices over one year fell by 3.85% in February, as compared to 3.1% in January.

“February coincides with the Chinese New Year and the companies promotions and price adjustments. This can explain the significant fluctuations experienced by the housing market”, said the China Index Academy firm.

The market should stabilize with the arrival of spring and the small measures taken by the government and that are already anticipated by the market. In the ten largest cities of China, which tend to have the most active real estate markets, new home prices fell by 0.18% year on year to 18960 Yuan.

Only two cities, Shanghai and Shenzhen, are experiencing an increase in property prices over the year. In Shanghai, apartment rents keep rising steadily while China’s yuan fell to its lowest level since 2012, leading to a price inflation. For instance, prices increased by 0.86% year on year to 32300 Yuan per square meter in February.

After almost two decades of soaring prices, 2014 was a turning point for the real estate market that represents 15% of China’s GDP, threatening the country’s growth prospects. All eyes are on the financial health of medium-sized developers, whose failures have raised fears of cascading bankrupts. Some, like China Overseas Grand Groups, announced a decline of 30% of their income in2014. Hopefully 2015 will be a year of recovery for China’s property market.

The Number Of Construction Permits Is On The Rise

According to the US Department of Commerce”, the number of building permits issued in the month of October increased by 5.1% to 1, 145 million in rate annualized against 1.030 million in September. This indicator is at its highest level since 2006.

Conversely the number of housing projects has slightly declined and reached 1.004 million in annualized pace. There is however an increase of 6.5% over the month of October 2014. As the number of development of construction of single-family house, this increased by 5.4% to 675 400 against 669 000 in September.

These indicators were already above the forecast announced last month. For the month of October, they bear witness once again to the gradual recovery of the real estate sector in the United States.
Finally to complete these good statistics of real estate, the NAIOP index, the Trade association for developers, once again increased to reach 61 and thus increase 5 points from October. After this new increase, the index almost found its value for the month of September which was 59.

Recall that a NAOIP with a value above 49 indicates that real estate sales forecasts are favourable.

Boom Of Impulse Property Purchases In The United States

Careful to inquire, before signing, on the regulation of the local market, and the habits and customs of condominium management.

While on vacation, falling under the charm of the place and considering purchasing a second home is a relatively common situation. In this “emotional” context, the difficulty is often remain reasonable and sensible… A prudent and attitude all the more essential to adopt as one moves away from his country.

Example of the United States:

Luxury homesThe United States is one of the headlights of foreign holidaymakers, architecture and the atmosphere of New York or for entertainment in Orlando. Favorite purchases are numerous, encouraged lately by a still low price conditions and a parity euro/dollar in favour of the Europeans. Result: the Foreigners succumb more easily to their desire to purchase ‘pleasure’, across the Atlantic. Good deals can be made to provided, however, to know the whys and wherefores surrounding the intended purchase.

Legislation, property taxes or condominium rules are to be taken into account before signing the deed of purchase. Relating, for example, cities such as New York or Miami, teeming with multiple purposes it is important to know.

The “co-op”: the great oral hosted by neighbors

Operating various and varied condos (condominiums) governed by more or less flexible rules, including the “co-op” represent the framed version, include studying closely.
Thus, regulations of many co – ops impose to the potential purchaser to obtain prior approval of owners already in place.

Some co – ops can impose rules on the Interior of the apartments. Others apply strict rules on the use of housing: duration of leaseco limited (fewer weeks maximum per year, for example), prohibition to hold a pet… Interference with individual freedom, which may be surprising for foreigners used to dispose of their property freely, once owners.

For their part, the Americans do not live it as a restriction of freedom and even celebrities are denied the right to acquire apartments in New York.

The precise knowledge of the condominium regulations is an essential aspect in these conditions before throwing his sights on a residence or accommodation

Bills: a budget to calculate

The rule is universal: it occupies his property throughout the year or only a few weeks a year, there are charges fixed, identical for all owners. A future recurrent expenditure to remember when buying. In order to properly estimate future loads, some points are to be monitored, in particular property tax last year and the current year, as well as the condominium fees. These can be more or less important depending on the level of services. Some homes offer, in fact, many services and quality (indoor pool, concierge, gym which sometimes even a basketball court!)… returning dear to non-permanent residents but which allow to set rents high in case of rental.

Another item to not be disregarded: the number of apartments at the building. Less housing, more risk of increase in load is important for reasons of potential vacancy. Finally, last test important: the year of construction of the building. More good is recent, more renovation expenses to predict will be low.

So that the loads are not an obstacle to the acquisition, some very recent buildings – for example, in the Financial district of New York – guarantee a low tax for a period of 5 to 10 years. A programme for lowering of taxes resulting from a partnership between the promoters and the municipality of New York. Finally, unlike Europe for example, about 90% of insurance are supported in the condo fees.

Rental: a lever to not overstate

All properties do not easily lend themselves to the game rentals. When purchasing ‘pleasure’, the owners acquired the property for their personal use, but – in order to minimize its cost – some looking to rent housing when they do serve. It is possible, but it must take into account the seasonality of certain markets. In Florida, for example, the rental market is subject to specific tourist cycles. Finally, who said said rental adaptable delivery to the greatest number. The chosen furniture should be considered.

The Fed Cautious But Optimistic About The American Economy

As many economists had predicted, the US federal reserve monetary policy Committee members have not announced change following their last meeting. On the other hand, they have suggested that interest rates could be adjusted upwards by a few months.

Despite an optimistic view of the FED regarding the U.S. economy: decline in unemployment, increased job creation and positive growth forecast; It recalls that all indicators are not beautiful-fixed, including inflation which has yet lowered these last months and the poor performance of some major American companies.

Thus, the Fed will not change its monetary policy before several months and interest rates will not relieved in the short term. The federal reserve adopts a position of patient in the standardization of its policy until at least next March during which held their next meeting.

A return to stability for the U.S. economy

Remember that late October the FED ended its policy of Quantitative Easing. Six years after the United States, the central banks of many world powers such as Europe or the Japan announced recently the launch of quantitative easing policies to reinvigorate their economies.

Of course, the FED waits before fully normalize its policy, however the United States display many positive indicators that suggest a certain return to stability. We can confirm once again the recovery of the American economy.

A House Sold for $ 150 million, a Record in the United States!

Forbes magazine was telling us today about the sale of a California coast house estimated $ 150 million! The origin of this sale, Petra Ecclestone, daughter of the Formula 1 billionaire!

Aged 23, Petra Ecclestone bought this incredible residence in 2011 for $ 85 million. 3 years and more than 20 million jobs later (requiring the work of 500 people), she put her property back on the market. If she can sell her house at this price, it will become a new record for the United States, for now held by a transaction of 147 million dollars last year in the Hamptons regions in the State of New York.

Note that if this could be a new record for the United States, we are still far from reaching the world record! We have in mind the home of billionaire Mukesh Ambani and 37 000 m² of living space ($ 725 million) or Berlusconi’s Villa Certosa in Sardinia (€ 450 million).