FTCR China Real Estate Index jumps on first-tier city sales surge

February 27, 2017

by: FT Confidential Research

The FTCR China Real Estate Index surged in February as the market bounced back from the lunar new year holiday. Despite the government’s ongoing campaign to clamp down on speculative activity, our index pointed to increasing sales for the first time since September while house prices grew at their fastest pace in four months. The recovery was not uniform: governments in first-tier cities may be leading the crackdown on speculation but it was in those markets that sales and prices rose the fastest in February. Sales fell for a fifth straight month in third-tier cities, although prices continued to increase at a robust pace. Average mortgage rates increased for first-time buyers but not by enough to suggest meaningful tightening.

• Developers reported that home sales rose for the first time in five months, but at their slowest pace since August 2014.
• Our Home Sales Index rose to 50.8 from 35.4 in January. In February 2016, the index stood at 53.2.
• Owner-occupiers were again the main source of demand (46.2 per cent), although the proportion of those looking to buy a second home (21.6 per cent) was the largest since last September.
• The volume of sales inquiries also surged to a five-month high, with our index rising to 60.5 from 39.3, led by first-tier cities.

• House price inflation grew at its fastest pace in four months in February.
• The FTCR Home Price Index rose to 61.3 from 59.8 in January.
• 63.5 per cent of developers offered a discount to the list price in February, the smallest proportion since March 2014 (55.6 per cent).

• Supply of new houses to the market fell for a fifth consecutive month.
• Our New Home Supply Index rose 7.4 points to 47.7, although trends of previous years suggest supply will increase in March.
• The share of developers reporting sales volume increases continued to outstrip that reporting supply growth: 34.4 per cent said transactions rose while just 20.5 per cent said supply did.

• Developers’ outlook for sales volumes recovered sharply in February while our index suggested those for price expectations strengthened for a third straight month.
• Our Home Sales Outlook Index surged 20.3 points to 61.8 while our Home Price Outlook Index increased to 61.4 from 55.1 in January.
• Just 4.3 per cent of developers expected prices to fall in March, although most — 68.6 per cent — expected prices to remain flat.

• Developers reported that access to discounted mortgages for first-time buyers fell in February: 49.5 per cent said this cohort could access loans below the benchmark interest rate versus 53 per cent in January.
• Mortgage discount availability fell sharply for first-time buyers in third-tier markets. The share of developers reporting that buyers in these cities could, on average, borrow at below the benchmark interest rate dropped to 57.8 per cent from 75.3 per cent in January. Discount mortgage access was largely unchanged in first-tier cities and increased slightly in second-tier cities.
• Mortgage discounts were slightly more readily available to second-time buyers, with 8.6 per cent of developers reporting such discounts, up from 5 per cent in January.

• Sales volume grew for the first time in five months in first- and second-tier cities but continued to fall in third-tier cities. Our Home Sales Index for third-tier cities rose 11.9 points month-on-month to 44.5, remaining below the 50 mark separating growth from contraction for a fifth month.
• Developers across all three city tiers reported another month of solid house price inflation. Our third-tier city Home Price sub-index ticked lower by 1.5 points to 61 but those for first- and second-tier cities rose 9.8 points and 0.9 points respectively. All three indices have consistently pointed to rising house prices since April 2015.

The FTCR China Real Estate survey is based on interviews with 300 developers in 40 cities. For further details click here. This report contains the headline figures from the latest Real Estate survey; the full results are available from our Database.

FT Confidential Research is an independent research service from the Financial Times, providing in-depth analysis of and statistical insight into China and Southeast Asia. Our team of researchers in these key markets combine findings from our proprietary surveys with on-the-ground research to provide predictive analysis for investors.