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A survey of the premier real estate market in late 2020
The “double heroes” in the Bay Area, Guangzhou and Shenzhen, will see tight market conditions in late 2020, Beijing’s transaction volume has started to rebound, and Shanghai is experiencing a resurgence of second-hand housing … The top-of-the-line housing market in 2021 will smell local price increases.
After a year-end “final” market wave, Beijing’s real estate market in 2020 finally ushered in the rare “spotty harvest” in recent years. According to data from Centaline Real Estate, in 2020 49,000 new homes will be signed online in Beijing and 169,000 second-hand homes will be sold, setting new highs in the last 5 and 4 years respectively.
This achievement was achieved while prices were stable. Shell Research Institute noted that in 2020, the average transaction price of new homes in Beijing was 48,147 yuan / square meter, an increase of 3% year-on-year; the average transaction price of second-hand housing was 60,485 yuan / square meter, down 0.5% year-on-year.
Stable prices and increasing volumes are considered the expected effect of the Beijing property market regulation.
In general, the industry sees the “317 New Deal” of 2017 as the starting point for a new round of regulation of the Beijing property market. Since the introduction of the “317 New Deal”, the Beijing real estate market has been regulated at all levels and constantly “checking for deficiencies”. The market has experienced a side period of more than three years and continues to stabilize.
Taking the “317 New Deal” as a limit, the Beijing real estate market transaction volume in 2020 has reached a new record since this round of regulation. Among them, in the December tail-up, single-month trading volume has returned to the pre-regulation level.
As for the country, the Beijing real estate market has always had a “weather vane” meaning. Tight control policies and improved supply relationships are seen as the main reasons for market stabilization.
“Domino effect” for houses with limited competition
Due to the impact on performance and other reasons, the volume of transactions in the real estate market tends to increase significantly at the end of the year, and the industry refers to it as a “tail market”. In 2020, the Beijing real estate market has seen a significant warming trend since the second half of the year, and the end of the year has also come on schedule.
Centaline Real Estate statistics show that in December 2020, Beijing’s new and second-hand homes sold 6,681 and 20,944 units respectively, which set a new monthly high since the “317 New Deal.”
Regarding the increase in transaction volume, the industry generally believes that this is the result of a number of factors such as the recovery in demand after a long period of lateralization, the release of demand after the epidemic and the relaxation of credit policies.
Statistics from the Shell Research Institute show that by December 2020, Beijing’s first and second major mortgage interest rates will drop 15 basis points year-over-year, which has also promoted the release of stiff demand.
In fact, in the first half of last year market liquidity was very abundant, although monetary policy turns neutral in the middle of the year, enthusiasm for the real estate capital market is still relatively high. In such circumstances, after the shed reform dividend period in the third and fourth tier cities in recent years, the market recovery momentum is no longer enough. Therefore, properties are sought in the central cities of the first and second level.
The warming of the Beijing property market occurred in this context. However, unlike Guangzhou and other cities that once experienced excessively rapid house prices, Beijing’s house prices have been stable for the past three years without major fluctuations. Among them, the prices of second-hand homes also fell in some areas.
A person in charge of a large-scale real estate company in Beijing told a reporter with the 21st Century Business Herald that there are two main reasons for the stability of housing prices in Beijing. First, the price cap policy is strict. To control house prices, Beijing once suspended the approval of new homes with a unit price of more than 100,000 yuan. Although the price cap policy has been relaxed in the past two years, the number of high-priced projects remains relatively small; While it increased supply, it also stabilized the average market price to some extent.
Competitive housing refers to houses that are built after auctioning land in the form of “limited home prices and competitive land prices.” Beijing began selling parcels of land for low-competition housing on a large scale since late 2017, and projects with low-competition housing began to enter the market in mid-2018. The Shell Research Institute noted that in recent years, houses of restricted competition accounted for more than 60% of the supply of new houses in Beijing, and the four districts of Daxing, Fengtai, Fangshan and Changping are the focus of the supply. By 2020, the share of restricted-competition housing transactions has reached nearly 50%, greatly changing the supply structure of Beijing’s new housing market.
The impact of restricted housing has brought a series of “domino effects.” Among them, the stabilizing effect of prices is the most significant. The aforementioned real estate company said that because the price is significantly lower than the market level, a limited competition housing project will often affect the price of 4 to 5 commercial housing projects in the surrounding area and affect the price of second-hand housing in the same area.
He said that due to oversupply, some restricted competition housing projects have fallen into slow sales, but some high-quality projects have become mainstream in the market. In the “Beijing 2020 Residential Sales Ranking List” compiled by Centaline Real Estate, the top 8 spots are all earned by restricted competition housing projects. Between them, the two projects of Vientiane Yuefu and Zhonghai Huanyu Times have sold more than 2,000 units, with sales of 9.69 billion yuan and 8.54 billion yuan respectively.
Price cuts become the main topic of second-hand housing transactions
In addition to the improvement in supply, demand in the Beijing real estate market has also remained stable. Most interviewees believe that under the country’s strictest real estate market control policies, speculative demand in the Beijing real estate market has disappeared and the share of investment demand is small. Except for the impact of special factors, the market no longer has the drive to heat up quickly.
Most of this “special factor” comes from outside of real estate. On April 30, 2020, the Xicheng District, which is the “educational mountain” of Beijing, issued new rules for educational reform, changing the “single-school division” to the “multiple-school division.” Xicheng District has also become the latest area of Beijing’s “six districts” to implement the “multi-school division.”
This policy aimed at promoting the equalization of basic education once caused the price of second-hand housing in Xicheng district to rise, but after the “window period” at the end of July 2020, prices in the area they gradually returned to stability.
The Shell Research Institute said that after continued regulation at both ends of supply and demand, the supply and demand structure of the Beijing property market tends to balance out. Among them, the supply-to-sell ratio of the new Beijing real estate market last year was 1.1: 1. Various indications indicate that the scale of transactions represents more than 70% of the second-hand housing sector, and the ratio between supply and demand has also improved considerably.
The aforementioned agencies noted that the second-hand housing transaction cycle in Beijing last year was 130 days, and the customer home transaction cycle was 99 days, which was 28 days and 14 days longer than in the same period last year. The pace of market transactions was still slow.
As the right to speak gradually shifts to the buyer, the seller continues to give up on pushing prices. Throughout 2020, Beijing second-hand homeowners will continue to focus on price reductions, and the number of price reductions in price adjustments accounted for 86%, which was basically the same year on year.
The Shell Research Institute stated that after the “317 New Deal”, Beijing experienced a period of deviant house prices for more than three years. The purchasing power of young people improves relatively and time to market is advanced. In 2020, 16% of second-hand home buyers in Beijing will be under the age of 29, an increase of 3% year-on-year.
It is worth noting that despite the rapid recovery in market transactions, there is still a gap between the Beijing property market and the high market before regulation. Among them, the scale of annual new home transactions has not exceeded the 50,000-set mark, which is not a small gap from the historical normal (before 2014) of 70,000 to 80,000 sets. The scale of second-hand housing transactions is less than 170,000 sets, and annual sales before regulation are typically more than 200,000 sets.
However, industry insiders generally believe that with the normalization of real estate market regulation and changes in the demand structure, the market will hardly have the momentum to increase significantly. The current transaction scale is expected to become the normal state of the Beijing real estate market in the next phase.
The price trend will also be stable. The Shell Research Institute noted that in the context of the gradual return of monetary policy to normal and the gradual deepening of real estate financial leverage, the average transaction price of second-hand housing in Beijing is expected to remain stable in 2021.
In terms of new homes, Beijing’s unrestricted land parcel transaction share increased from 48% in 2019 to 84% in 2020, which will support future house prices. However, since there are still enough houses of restricted competition waiting to enter the market, the price will not increase significantly.
(Author: Zhang Min Editor: Lin Hong)
(Edit: Wen Jing)
