Savills World Research

Briefing Residential sector March 2017

Image: Newopen Educational Town, Jiangbeizui area SUMMARY In Q4/2016, both residential transaction volumes and average prices saw impressive increases.

­ The real estate market continued to ­ Residential market transaction grow steadily in 2016, with transaction volumes reached 6 million sq m, up volumes reaching 18.8 million sq m, an impressive 53% quarter-on-quarter “The fourth quarter was a up 28% year-on-year (YoY). This can (QoQ) and 63% YoY. successful one for the land be attributed to the favourable housing policies implemented in the city, which ­ Mass market residential prices market, with increases in stimulated great demand. increased 6% QoQ to an average of RMB7,210 per sq m. both transaction volumes and ­ Real estate investment was accommodation values.” Dave down 0.7% YoY to RMB373 billion in ­ The land market saw a surge in Q4/2016. both transaction volumes and the Law, Savills Research accommodation value (AV) in Q4/2016.

savills.com.cn/research 01 Briefing |Chongqing residential sector March 2017

Forecast GRAPH 1 ­- Transaction volumes in Q1/2017 are Real estate investment YTD, 2005 – Nov 2016 expected to see a flat performance due to the traditionally quiet period Real estate investment (LHS) YoY growth (RHS) experienced at this time of year. 500 40% 450 35% ­- Additionally, land market 400 30% transactions are also expected to decrease, due to the side-effects of 350 25% ’s supply-side reform. 300 20%

250 15%

Macro Market billion RMB The implementation of favourable 200 10% housing policies at the beginning of 2016, combined with a stable 150 5% real estate market, attracted many 100 0% non-residents to purchase houses in the city; buyers who had previously 50 -5% adopted a “wait and see” attitude 0 -10% were motivated to enter the market 05 06 07 08 09 10 11 12 13 14 15 16 for fear of escalating prices. This saw Source: Chongqing Statistics Bureau, Savills Research

GRAPH 2 transaction volumes increase to 6.1 districts such as the Nan’an Mass-market residential transaction million in the fourth quarter, up 53% consistently performed well in volumes and average prices, QoQ and 63% YoY. Due to growing transaction volumes, reaching demand, developers launched approximately 884,675 sq m Q3/2012-Q4/2016 new projects with higher prices, and accounting for 14% of total Transaction volume (LHS) Average price (RHS) which pushed up average prices to transaction volumes in the fourth 8 8,000 RMB7,210 per sq m. quarter. The Jiangbei district saw 7 7,000 the highest residential prices, Land transaction volumes continued RMB8,464 per sq m, as a result of 6 6,000 to increase for the first three the large transaction volumes in 5 5,000 m sq per RMB quarters. The average AV also the Jiangbeizui CBD, which raised average prices in this area. 4 4,000 saw compelling growth, which can be attributed to the recovery of million sq m 3 3,000 developers’ confidence coming from Similar to the mass market, the high- 2 2,000 the turnaround of Chongqing’s real end residential market witnessed estate market. increases in both transaction 1 1,000 volumes and average prices 0 0 Real estate investment reached this quarter, with average prices Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 RMB373 billion, down 0.7% YoY. increasing 7.0% QoQ and 8% YoY to 2012 2013 2014 2015 2016 Of this, residential investment was RMB18,983 per sq m. Source: Savills Research recorded at RMB232 billion, down 3.0% YoY, accounting for 62.3% of Among the new project launches total investments. onto the market during Q4/2016, two GRAPH 3 of the more notable projects were High-end residential price index, The three-day Chongqing Autumn the Newopen Educational Town in Q1/2013–Q4/2016 Housing Fair 2016 opened on the Jiangbeizui area, which sold at 17 October and saw first-hand RMB16,000 per sq m, and Yuejiang

104 residential sales reach RMB4.8 Guoji in the , 102 billion, with residential prices which sold at RMB13,500 per sq m. 100 averaging RMB7,027 per sq m, 98 up 11.5% from last year’s fair. The Land market 96 transacted area was up 22% from Approximately 4.54 million sq m of 94 92 2015, to 687,900 sq m, but down 6% land was successfully transacted 90 QoQ. in Q4/2016, up an astounding 98%

Q1/2011 = 100 Q1/2011 88 QoQ and 44% YoY, accounting for 86 Transaction volumes in the 47% of total transaction volumes 84 , a traditionally in 2016. In addition, the average AV 82 reached a new high of RMB3,456 per 80 favoured residential area, reached 78 approximately 1,046,754 sq m, up sq m, up 19% QoQ and 58% YoY. Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 62% QoQ, accounting for 17% of 2013 2014 2015 2016 total transaction volumes in the During Q4/2016, many well-known Source: Savills Research fourth quarter. Highly populated developers such as Longfor,

02 Briefing | Chongqing residential sector March 2017

Chongqing Huayu Property, China 2016 Overview million sq m. Due to the economic Resources (CR) and Singaporean- Residential transaction volumes downturn and China’s supply-side owned Hong Leong Group, entered totalled 18.8 million sq m in 2016, reform, there was an overwhelming the city’s land market. As a result, while average prices reached drop in land transaction volumes some notable land acquisitions RMB6,742 per sq m. in Q1/2016. However due to the were made. Longfor purchased heating up of the residential market, one land plot in the Liangjiang In the first half of 2016, the central transaction volumes reached a peak New Area, with the highest AV in government continued to implement in Q4/2016. This year also saw the Q4/2016 of RMB7,437 per sq m, favourable policies, which included highest recorded average AV in the with a total area of 221,522 sq m. reducing the minimum down last four years of RMB2,851 per sq CR also made a land acquisition in payment requirements for first m, due to several land acquisitions the Liangjiang New Area, with a total home buyers to 20%, lowering the with high AVs. area of 200,112 sq m and an average property deed tax by 1% for houses AV of RMB6,164. Another notable with an area under 90 sq m, and 2017 Outlook land acquisition was that made replacing Business Tax (BT) with Land supply and transactions are by the Hong Leong Group in the Value-Added Tax (VAT). As a result, expected to decrease, predominantly Jiefangbei area, with an average AV residential transaction volumes due to China’s supply-side reform, of RMB7,088 per sq m. reached 8.7 million sq m, up 15% which stipulated that land supply YoY in 1H/2016. However, due to would gradually decrease by 10% Transaction volumes in the Liangjiang discounts offered by developers to from 2016 to 2017. New Area reached 1,855,462 sq m, sell off inventory, average prices were accounting for 41% of city-wide RMB6,481 per sq m, down 9% YoY. Due to the high volume of inventory transaction volumes – the highest which was sold during 2015 and of Q4/2016. The Ba’nan district The second half of 2016 saw both 2016, developers are expected to also performed well, with a total transaction volumes and residential offer fewer discounts, causing the transaction volume of 1,390,838 prices increase impressively, with AV to rise. In view of this, average sq m, accounting for 30% of total transaction volumes increasing prices are expected to increase city-wide transaction volumes, a to 10.1 million sq m and average slightly, however, this is expected consequence of the lower average prices to RMB7,004 per sq m, to be limited, with local government AV of RMB1,917 per sq m. The predominantly due to high levels of looking to maintain control over the Beibei district was once again a demand. market by introducing restrictive popular choice among developers, policies when necessary. Finally, with a transaction volume of The land market experienced transaction volumes may decrease 1,036,386 sq m, accounting for 23% consistent growth in transaction due to higher prices and less supply of total volume. volumes during 2016, reaching 9.6 than expected. 

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