Chinese Housing Markets: What We Know and What We Need to Know - - PowerPoint PPT Presentation

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Chinese Housing Markets: What We Know and What We Need to Know - - PowerPoint PPT Presentation

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Chinese Housing Markets: What We Know and What We Need to Know Yongheng Deng, Joe Gyourko & Jing Wu Chinas Real Estate Markets NYU Stern School of Business April 17, 2015 1 DocumentationPrices and Quantities What We NeedBetter

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Chinese Housing Markets: What We Know and What We Need to Know

Yongheng Deng, Joe Gyourko & Jing Wu China’s Real Estate Markets NYU Stern School of Business April 17, 2015

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Documentation—Prices and Quantities

  • What We Need—Better Measurement

– No official constant quality house price series

  • Private series exist (and we use one from Tsinghua in our paper)

– Land market

  • Can see raw land sales (leasehold estates)
  • Chinese Residential Land Price Indexes

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Documentation—Prices and Quantities

  • What Do These Data Show?

– Strong trend price growth in aggregate in land and house values

  • Economically large variation about that trend

– Substantial heterogeneity across markets

  • Extremely strong real price growth in Beijing, but real land values have fallen

substantially the past two years in Dalian

– Transactions Volume

  • Has fallen in recent quarters both in terms of land parcel sales and in the amount of

new housing sold

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Documentation: A Closer Look at Land Prices Across Major Markets

  • Chinese Residential Land Price Indexes (CRLPI)

– Wharton‐Tsinghua‐NUS collaboration (Gyourko, Wu, Deng) – 35 major markets, not just east coast or East region cities

  • See next slide

– Transactions‐based, not appraisal‐based – Full samples of land sold by local governments to private residential developers – Constant quality price indexes created

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城市覆盖范围 City Coverage

  • 目前CRLPI指数覆盖全

国35个大中城市。

Currently CRLPI covers 35 major cities in mainland China.

  • 这些城市占据了全国新

建商品住房市场约50% 的市场份额。

These cities contribute to about 50% of the new home market in the whole country.

30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Market Share by Floor Area Market Share by Total Value

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Figure 1: Chinese National Real Land Price Index

35 Markets, Constant Quality Series (Quarterly: 2004q1 – 2014q4)

50 100 150 200 250 300 350 400 450 500 2004(4) 2005(4) 2006(4) 2007(4) 2008(4) 2009(4) 2010(4) 2011(4) 2012(4) 2013(4) 2014(4) 2004(1)=100

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Figure 1’: Chinese National Real Log Land Price Index

35 Markets, Constant Quality Series (Quarterly: 2004q1 – 2014q4)

4.5 5 5.5 6 2004(4) 2005(4) 2006(4) 2007(4) 2008(4) 2009(4) 2010(4) 2011(4) 2012(4) 2013(4) 2014(4)

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Figure 2: Number of Parcels Sold

35 Markets (Quarterly: 2004q1 – 2014q4)

100 200 300 400 500 600 700 2003(4) 2004(4) 2005(4) 2006(4) 2007(4) 2008(4) 2009(4) 2010(4) 2011(4) 2012(4) 2013(4) 2014(4)

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Chinese Housing Unit (Really Space) Growth 2007‐2014

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Figure 6: Year-Over-Year Growth in Floor Space Sold, Newly-Built Housing Units, 2007(1)-2014(4)

  • 40%
  • 20%

0% 20% 40% 60% 80% 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 National Level 35 Major Cities

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Figure 3: Chinese Regional Real Land Price Index

East, Middle and West Regions, Constant Quality Series (Semi‐annually: 2004h1 – 2014h2)

100 200 300 400 500 2004h2 2005h2 2006h2 2007h2 2008h2 2009h2 2010h2 2011h2 2012h2 2013h2 2014h2

East Middle West

2004h1=100

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Summary Statistics: 12 Major Cities 2004‐2014 (44 quarters)

Table 3: City Price Index Real Growth 2004‐2014 11 years 2006‐2014 9 years 2007‐2014 8 years Beijing Changsha Chengdu Chongqing Dalian Hangzhou Nanjing Tianjin Wuhan Shanghai Guangzhou Xian Total Appreciation 1036% 248% 201% 449% 101% 273% 248% 332% 102% 342% 169% 78% Compound Annual Growth Rate 27.5% 13.3% 11.6% 18.6% 7.2% 14.1% 13.3% 15.7% 7.3% 20.4% 15.2% 8.6%

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100 200 300 400 500 600 700 800 900 1000 1100 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2004=100

Beijing 12

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50 100 150 200 250 300 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2004=100

Dalian

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100 200 300 400 500 600 700 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2004=100

Chongqing 14

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Documentation—Prices and Quantities

  • What Do We Need to Know?

– Need broader constant quality price series

  • Resale market, not just new construction

– Need a longer time series, but only time will deliver that – Need number of units, not just amount of space

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What Do We Need to Know?

  • Better measures of price and quantity are not enough

– Cannot tell all that much just by looking at P and Q

  • Intersection of supply and demand
  • What do local market supply and demand fundamentals look

like in Chinese housing markets?

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Metrics on Supply‐Demand (Im)Balances

  • Annual new construction relative to market size
  • Unsold inventory relative to sales volume in market
  • Vacancy rates in nine provinces
  • Price‐to‐rent ratios
  • Price‐to‐income ratios
  • Breakeven real appreciation expectations from Poterba user

cost equation

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Annual New Supply As Share of 2010 Stock

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0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Beijing Tianjin Shanghai Chongqing 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Changsha Guangzhou Chengdu Xi'an 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Nanjing Dalian Hangzhou Wuhan

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Unsold Inventory Held by Developers As Share of Transactions Volume in Market

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0% 50% 100% 150% 200% 250% 300% 350% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Beijing Tianjin Shanghai Chongqing 0% 50% 100% 150% 200% 250% 300% 350% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Changsha Guangzhou Chengdu Xi'an 0% 50% 100% 150% 200% 250% 300% 350% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Nanjing Dalian Hangzhou Wuhan

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Aggregate Space Delivered 35 Major Markets

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200 250 300 350 400 450 500 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

million sq.m.

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New Vacancy Rate Estimates

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0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 2002 2003 2004 2005 2006 2007 2008 2009

Vacancy Rate

9 Provinces Beijing Liaoning Zhejiang Anhui Hubei Guangdong Sichuan Shaanxi Gansu

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Longer‐Run Supply/Demand Trends 2001‐2012

  • Supply at least 10% below our projected demand

– Beijing (79%), Changchun (89%), Shanghai (72%), Hangzhou (70%), Ningbo (78%), Jinan (84%), Guangzhou (81%), Shenzhen (68%), Haikou (79%), Urumqi (79%)

  • Supply at least 30% above our projected demand

– Hohhot (171%), Shenyang (142%), Harbin (138%), Nanchang (161%), Qingdao (142%), Zhengzhou (186%), Wuhan (140%), Chongqing (188%), Chengdu (177%), Guiyang (141%), Lanzhou (143%), Yinchuan (174%)

  • Other Major Markets Somewhere in Between, with Most Looking

Modestly Oversupplied

– Tianjin (120%), Shijiazhuang (113%), Taiyuan (120%), Dalian (100%), Nanjing (115%), Hefei (107%), Fuzhou (110%), Xiamen (93%), Changsha (119%), Nanning (112%), Xian (109%), Xining (94%)

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Quarterly Price‐to‐Rent Ratios

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20 25 30 35 40 45 50 55 60 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 Beijing Tianjin Shanghai Chongqing 20 25 30 35 40 45 50 55 60 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 Changsha Guangzhou Chengdu Xian 20 25 30 35 40 45 50 55 60 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 Dalian Nanjing Hangzhou Wuhan

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Annual Price‐to‐Income Ratios

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4 8 12 16 20 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Beijing Tianjin Shanghai Chongqing 4 8 12 16 20 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Changsha Guangzhou Chengdu Xian 4 8 12 16 20 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Dalian Nanjing Hangzhou Wuhan

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Conclusions

  • Need more effort on measurement of prices in particular

– China needs a S&P/Case‐Shiller price index – Ability to gauge land market is a real advantage

  • Keep context in mind when examining prices and quantities

– Chinese prices started from very low base – China is a high growth and high volatility market

  • Do not see much value in trying to put the label ‘bubble’ on

these markets

– Very short time series, with imperfect data – Still, no doubt Chinese housing markets are very risky

  • ‘Priced to perfection’ in the following sense: even small changes in expectations,

absent countervailing rent increases, will lead to large negative changes in price levels per Poterba’s user cost framework

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Conclusions

  • Beyond ‘rich’ pricing, supply appears to have outpaced

demand over the last decade, not just the last year, in various markets

– Primarily, but not exclusively, in the interior of the country – Any negative demand shock will occur in an environment of weak fundamentals in these places

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