Striving for sustainable growth in adversity

BY / Richard Ho and Vivienne Huang

　　According to a report on global property bubbles recently published by a top investment bank, in the wake of the 2008 financial crisis, the five most overheated markets have produced a spike of 20-80% in housing prices. However, China is not on the list despite seeing a multi-fold increase during the same period. Housing prices in China have been soaring since 2012, with sales records being repeatedly broken by a succession of top bidders.

　　Bubbles in China’s property market have never stopped being a controversial subject. Still, it requires deeper investigation to see whether the scale of growth we have witnessed equals sustainability, and to explore ways to maintain reasonable profitability and liquidity.

　　It is generally accepted that the government’s regulation has had limited effect so far. In 2012, the government kept a steady but tight rein on the property market unlike its earlier approach in 2010 when it repeatedly tightened the screws. In 2013, after the market had had time to assimilate the government’s five high-profile measures to stem rising housing prices, we saw a full recovery of the investment environment and the familiar trends – rises in sales and prices.

　　To get a better picture of the outlook for the property market, Deloitte took a sample of 168 property companies in 2011, and 174 in 2012. These were companies variously listed in Shanghai, Shenzhen, and Hong Kong, largely operating in the Chinese Mainland market, and with more than half of their revenues and asset incomes being generated from property development or investment.

Richard Ho
Deloitte China Audit Partner / National Real Estate Industry Managing Partner

Vivienne Huang
Deloitte China Research & Insight Centre Manager / National Real Estate Industry Researcher