GBA property markets cool, not fast enough

Despite a contraction in bank lending to Guangdong’s real-estate market in Q2, property volumes and prices throughout the key GBA cities showed strength in the first half of the year as developers turned to alternative funding channels, latest provincial data shows. 

According to the latest report by the provincial housing bureau, GBA cities diverged from the rest of the province between the first and second quarters. This was primarily due to the cost of capital. The eastern, western and northern regions of the province saw a rise in volumes but prices fell, while the nine cities of the GBA saw a rise in both volumes and prices.

Guangdong sold a total of 63.218 million sqm in property during the first half, down 3.7% year-on-year. Total contracted sales, however, were RMB888.76 billion, up 6.6% year-on-year.

As of the end of June, the province has 26.35 million sqm of homes and 29.11 million sqm of non-residential space available for sale, up 2.1% and 10.1% YoY, respectively. 

The province’s real estate enterprises raised RMB1.169 trillion of funds in the first half, up a healthy 13.2%. However, the cost of capital rose in the second quarter. With sales weakening in May and June, the growth rate of pre-sales deposits was 31.8 percentage points lower than that in the first quarter. 

Moreover, domestic bank loans to the industry shrunk, down 3% YoY and 22.6% QoQ. This led developers to alternative financing channels, which saw rise of 37.8% YoY and 44.7% from the previous quarter. 

Overall real-estate investment in the first half rose 12.4% to RMB725.56 billion, 0.4 percentage points lower than Q1. Land acquisition costs rose 33.6% to RMB268.127 billion.   The average floor price paid by developers was RMB8,114 per sqm, up 31.0% year-on-year.

According to the report, the central government’s directive that “housing is for living, not speculation,” will ensure real-estate financing is tightened further in the second half of the year. At the local level, cities are expected to deploy their own policies accordingly to achieve the goal of “stabilizing housing prices, stabilizing land prices and stabilizing investor expectations.”

Correction: a previous version of this article said that average prices of residential housing across the nine GBA cities inside Guangdong had risen by 31% in the first half. That was a mistake. It was the cost paid by developers for land that went up 31%. Sorry.

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