June 14, 2017 9:00 am JST
FT Confidential Research

China DataView: First-time home buyers priced out of big cities

Upgraders become largest buyers as incomes fail to keep up with surging house prices

© Reuters

Our monthly survey of real estate developers shows the extent to which first-tier Chinese cities have become the preserve of buyers who are already on the property ladder and looking to trade up. Since the start of 2013, the proportion of developers saying that upgraders are their biggest customer base has been trending upwards.

In this regard, Beijing, Shanghai, Shenzhen and Guangzhou are little different from global cities such as London, New York and Hong Kong, all of which have affordability crises of varying intensity. But China's first-tier cities differ in that buyers of second homes have been effectively locked out, and are unable to access many second- and third-tier cities either.

The housing policy pendulum has swung decisively back towards administrative tightening over the past eight months in response to a speculative frenzy. The focus of these curbs is again on those who own more than one home - speculators, in the eyes of a now-intolerant government. A combination of tighter credit availability and more stringent rules on who can buy has squeezed first-tier-city markets.

Home sales have already collapsed in these markets, and there are signs that prices may begin falling if the tightening campaign continues. However, the current policy trajectory is unlikely to bring meaningful relief to potential first-time buyers in the big cities: the growth in house prices in recent years has dwarfed that of their incomes.

Besides, the Chinese government needs a reasonably buoyant housing market to meet its growth targets and may eventually be forced to relax policy, as it has done so often in the past.

This article was first published on June 13 by FT Confidential Research.

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. A team of researchers in these key markets combine findings from proprietary surveys with on-the-ground research to provide predictive analysis for investors.

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