Short-term House Price Adjustment “Inevitable” in China

October 15, 2014

Mei Jianping, CKGSB Professor of Finance and a top director at a real estate research institution, predicted in an interview with Korean newspaper E Daily that another rapid price increase in the real estate market would likely not happen within the next few years. Furthermore, he forecast that price drops may continue for a short while, before it gradually recovers.

The Chinese real estate market is slowing down. In some cities, since too many houses have already been built, supply is exceeding demand. For this reason, partial adjustments will inevitably be made.

From now on, the real estate market will be different from the way it was in the past. Previously, supply was smaller than demand. But current supply and demand are similar, and as China increasingly becomes an aging society, demand will continue to weaken. However, China is trying to create many investment opportunities both by reform and by its open-door policy. As the Chinese real estate market develops, it is expected to be based on demand, as is the case in more developed countries. There is a small chance of sharp rise in the property market in the next few years.

With regards to the future of the Chinese real estate market, Prof. Liu said, “The Chinese property bubble bursting is not a simple problem. In a few cities, the price of real estate has been slightly distorted since the number of investment opportunities was low, while the supply of housing was relatively small. However, from now on, property prices will be normalized from these inflated prices.” He added, “This, by no means, infers a sharp price decline. Rather, price stabilization is expected. China’s economy is in transition. From manufacturing and real estate, it has been changing to service and innovative industries. In this context, a short-term property price adjustment is inevitable. But, in 2-3 years’ time, it will be stabilized.”

To read the original article in Korean on the E Daily website, please click here.

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