HONG KONG - The premiums developers in China pay for land rebounded sharply in the first quarter of 2019 as credit conditions and purchase requirements eased, taking some firms by surprise and prompting caution from others on the pickup in prices.
Second-tier cities have led the 2019 gains, with premiums in eastern Hefei and southwestern Chongqing’s at 86 percent and 25 percent, respectively.“Q1 land prices in some cities have already surpassed the market peak in 2016,” said CRIC researcher Xie Yang-chun, citing Chongqing and Zhengzhou, in east-central China, as examples. House prices reached record highs in 2016, prompting the government to introduce tightening measures.
The rebound comes hand in hand with looser credit conditions this year. China has cut the amount of cash banks must keep in reserve five times since last year to encourage more lending. Banks responded by making it easier for both home buyers to borrow and for developers to secure new funds. New home prices also grew slightly faster in March and property sales by floor area rose at their fastest pace in seven months.Sun Hongbin, chairman of Sunac China, the country’s No. 4 developer, is not optimistic this year, he told an earnings conference last month. The company should tread cautiously because asking prices were high, while home sales would not recover significantly, he said.
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