The average sales price of prime, first-hand residential land in Tier 1 and 2 cities grew by the lowest level in seven years in 2H 2018. This cooling appetite for residential land is attributed to deleveraging pressure on developers and a slowdown in the residential transaction volume. The modest rebound recorded during 1H 2019, saw the average prime prices of Tier 1, 2 and 3 & 4 cities up by 13.9%, 20.0% and 19.8%, respectively. Nevertheless, we do not expect the buying momentum by developers to be maintained as the central government continues to curb both domestic and overseas funding channels. Meanwhile, some local governments have tightened regulations for residential land site sales and are forbidding unit pre-sales in those cities with overheated prices, thus increasing risks for developers.
Data points through end of September 2019. Change represents month-over-month change.
A growing number of startups, operators, developers and investors have entered into the rental housing market in just the last few years and this has led to strong competition. In order to compete for a slice of the rental market, some players have adopted an aggressive business model by paying high prices to landlords in order to secure units for long-term lease and subletting at lower prices to individual tenants to achieve ideal occupation rates. These players faced greater financial pressures, and several of them went bankrupt. More sophisticated investors would not likely take on an asset-light business model. There are over 90 branded co-living apartment operators in China, the two largest being Mofang, (invested by Avic Trust, Warburg Pincus and DT Capital), and Port Apartments, owned by local developer – China Vanke.
Please note that the content of this report is for informational purposes only and should not be viewed as investment advice or an offer or solicitation. Any opinions are solely those of the Strategy and Research Team of CBRE Global Investors and are subject to change without notice, and may not be consistent with market trends or future events. This research is based on current public information that we consider reliable, but we do not represent it as accurate, updated or complete, and it should not be relied on as such.
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