Can a cooling property market be good news? I certainly think so. This is especially if the said market is China’s. It is very important for China’s property market to cool down slowly. According to an article in TheStar: China’s housing market likely to continue to cool, says Fitch. The two main reasons contributing to the housing market cooling according to Fitch Ratings would be stronger restrictions on home purchases across many cities and tighter credit conditions. It said, “Price gains have also moderated. Secondary home prices in Tier 1 cities rose by 28.7% in 2016, but increased by just 3.6% in the first five months of 2017, and fell for the first time since September 2014 in May.” It shared that the authorities have stepped in to prevent excessive froth in the market. With the current sentiment, first time home buyers may postpone their purchases. Fitch also said, “House prices are likely to decline slightly in 2H17, as demand weakens. We expect prices in Tier 1 cities to hold up better than in lower-tier cities. Prices in Tier 1 cities have risen by almost 90% in the last four years, compared with increases of 10%-25% in lower-tier cities.” Full article in TheStar here.
It’s important to note that all these are based on average numbers. If the property is in a Tier 1 city and is within the city centre for example, the prices would definitely be well supported. For any significant falls to home prices, the economy itself has to be doing badly. At this moment, it’s clear to see that China will still be growing even if no longer as fast as many years ago. According to its PremierLi Keqiang, the targeted growth for 2017 should be achieved. Here’s the article in Xinhua. He said, “The Chinese economy has become more stable and sustainable, and has made progress in restructuring and improving efficiency.” GDP target for 2017 is set at 6.5 percent. GDP growth for China in 2016 was 6.7 percent. Its recent quarter was good. It grew by 6.9 percent year on year and it was the quickest increase in 18 months. (I think I want to be confident with what Premier Li is saying, for the sake of many countries in the world which will benefit when China grows)
I think China will continue to restrict movement of funds out of China for property purchase. The reason is simple, if the funds could be invested within, why move them outside? However, when we look at a grander scheme of things, China is not moving backwards. It is pushing ahead with the One Belt One Road initiatives. Here’s one earlier article: US$124 billion is now open to all nations, take or not Would it affect Iskandar then? Let’s note that the investments by the Chinese into Iskandar can slow but as long as it does not stop, then there is a chance that investors from other nations can take up some of the slack. Singaporeans included, especially. Malaysia’s GDP growth also seems to be accelerating ahead because the world demand for our exports seems to be recovering OR we are becoming more competitive and is thus exporting more versus other nations. Here’s one latest article in thedgemarkets.com So, should we still invest in property? I think as long as we do not buy the wrong one, definitely it’s a great long term investment.
written on 4 July 2017
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