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Agricultural Bank Says China Real Estate Prices Need to Drop 25 Percent

According to analysts from China Agricultural Bank (ABC) real estate prices should be expected to drop another 25% before stabilizing. While these comments are among statements on the country’s property market, coming in an official statement from one of China’s four biggest (and state-owned) banks, they can be seen as reflecting sentiment among policy-makers as well as economic analysts.

The statement was made at the recently concluded central economic work conference which prescribed that urban housing prices should return to “reasonable levels.” As reported in Caixin Online,

 

According to the bank’s research, for housing prices to be reasonable, they should first drop to a level which most residents can afford and then climb at a stable and relatively low pace.
The report concludes that, in the first stage of adjustment, housing prices in the most developed, first-tier cities need to drop between 10% and 25%; prices in second-tier cities need to decrease by 5% to 15%, while prices in third-tier cities should drop to a level that matches current urbanization levels.
The calculation was based on assumptions that China’s average real household income is 1.5 times the figure released by the National Bureau of Statistics, and that the average floor space of housing is 60 to 65 square meters in first-tier cities and around 80 square meters for less developed cities.

So for those of you looking for the right time to jump back into China’s residential market, the answer should be, “Not yet.” And this is just another indicator that the residential real estate sector cannot be counted on to add significantly to China’s GDP in 2012.

 


Posted by on February 26, 2012.

Tags: , , , , , ,

Categories: Asia, Real Estate

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