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Research Report

26/11/2019 16:50

{I-bank focus}China home sales volume set to retreat in 2020

[ET Net News Agency, 26 November 2019] Citi Research sees three inflection points on
the China property market in terms of sales volume, starts and completions in 2020.
The research house expects the sales driver to be price, not volume.
Citi expects that residential sales volume set to retreat (-5%) in 2020 from 2019's
record high to 1.43bn sqm GFA (versus 2017/18: 1.45bn/1.48bn), led by (1) 10% decline in
T3/4 cities on fading short-term demand boosted by local policy in 4Q; (2) price cuts in
T3/4 from September altered price expectation; (3) slowing new births and household
formation.
It also expects that GFA completions to turn into mild growth (5%). The trend turned up
in 4Q after declines in three consecutive years in 2017-19, in contrast to the robust
sales volume. The cycle was extended by 10 months in 2017/18 due to the 13th five-year
plan in 2017 on environment protection, fully-fitted units and prefabrication.
Citi expects GFA starts would decline by 6.6% from the record-high in 2019 (above 2018
level) on less land sold in 2019 (estimated 10%) and slowing sales in T3/4 cities. Real
Estate Investment (REI) growth (10% of GDP) to slow to 7.8% (2019: +10%) on slower land
purchase. Land sales area to drop 7% on limited supply (T1/2) and developer interest
(T3/4). More inventory is likely at T3/4 cities but still below 2013/14 level.
Citi said ASPs look set to grow 10%/7% for T1/2 cities, 5% for low T2/key T3 cities but
decline by 2% for T3/4 cities. (KL)

Remark: Real time quote last updated: 21/02/2020 17:59
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