China’s Real Estate Investment Rises

on Jun 12, 2012

China’s real estate investments have significantly increased since the beginning of the year. According to data released by the National Bureau of Statistics, during the first five months of the year investment demands in the real estate sector of China rose 18.5 per cent year-on-year to 2.22 trillion Yuan (£222.7 billion), with the growth rate down 0.2 percentage point from the first four months. This increase was slower than the 18.7 per cent pace for January through April, but investment for May alone was up 18.2 per cent from a year earlier, to 637.8 billion Yuan, against April’s 9.2 per cent, according to Dow Jones Newswires calculations.

Over the period, January – May 2012, investments in residential properties rose 13.6 per cent year-on-year in the first five months to 1.5 trillion Yuan, accounting for 68 per cent of total property investments. On the other hand, the built-up area of new residential construction fell 8.2 per cent year-on-year to 538.82 million square meters, the National Bureau of Statistics further states.

!m[](/uploads/story/112/thumbs/pic_1_inline.png)Other developments in China’s real estate sector during the first five months of the year include the transaction value of commercial properties which fell to 1.69 trillion Yuan, or 9.1 per cent from a year ago. At the same time the transaction value of residential properties dropped 10.6 per cent year-on-year. At the end of May, the inventory of commercial properties rose 4.32 million square meters from the end of April to 307.4 million square meters, while the inventory of homes increased 2.78 million square meters. China’s property developers, who last year contributed a collective 13 per cent of GDP, acquired 135.32 million square meters of land during the first five months, down 18.7 per cent from a year ago, according to the National Bureau of Statistics.

The investment rise in the Chinese real estate market had its effect on the sector and companies, such as Xinyuan Real Estate (XIN), China Housing and Land Development (CHLN) and E-House Holdings Limited (EJ). Shares of China Vanke, the country’s largest property developer by market value, for example, last week rose 0.67 per cent to trade at 8.98 Yuan per share.

With sales picking up and price declines moderating, the real estate market in many major Chinese cities shows signs of recovery. The development comes as local authorities slightly roll back some property-market curbs, part of the government effort to spur the economy that has included an interest-rate cut last week, which is the first measure like this since 2008. And while there are signs that the real estate market is recovering, this does not mean a big comeback is imminent, analysts warn. The looser monetary environment after last week’s quarter-point interest-rate cut will ease financing pressure on property developers and spur property buying. Yet local governments have vowed to maintain limits on the number of properties people can buy, as the hope for stable growth is tempered by fear of a renewed price surge.