Review of Guangzhou’s real estate market in 2004

Source: 21^st century economic newspaper

Beginning with some numbers will give us a clear background of Guangzhou’s real estate market in 2004. The floor area of commodity houses sold reached 19.69 million square meters with amount of 78.97 billion yuan, up 20.2% and 30.7% respectively. Among them, the floor area of dwellings reached 15.29 million square meters up 17.4%. The floor area of office buildings reached 626.4 thousand meters, up 43.3%. The floor area of store reached 839.2 thousand square meters, down 18.6%.  

Now according to a report called “Effect of Macro Control on the Real Estate Market and the Market Prediction in 2005”, the second level of land market in Guangzhou was active in 2004 and the price of houses began to ascend. Concerning the prediction for year 2005, the report said the first level of land market would continue to be in boom, the price of houses would increase and as a result the amplitude of house price would decrease compared with year 2004. 

The first level of land market continues to be in boom  

Because of the governmental macro control, the first level land market was kept in silence in 2004. Although the first level of land market was in such situation, it didn’t influence the land requirement of developers. After the concept of Guangzhou-Foshan economic circle was confirmed, the big real estate developers began to stare at the opportunity in Nanhai District in Foshan city. They competed with each other fiercely.

The second level of land market was very active. There 66 lands sold in the old 8 districts, up 34.7%. The total floor areas reached 1.27 million square meters, down 3.8%, while the sales amount reached RMB 3.23 billion yuan, up 74.4%.  

         Considering the demand of the developers for the lands, the housing management bureau said that the mature land would be sold at a higher speed next year. But the detail information was still forbidden to open.  

 According to he Master Plan of Land Use of Guangzhou, the land will be sold under the main principle that is together with the developing phase of the city. In the future, Yuan Cun district will be an important area for the land development. According to the plan, the government will construct a sportsmen village for the Asian Games. And residential use, commercial use and entertainment use will be the main function of this area.

 The price of houses declined a little by 0.2% in the end of year 2004.

There were 12 lands sold in 2003 with total area of 307 thousand square meters and total amount of 1.9 billion yuan.

 With the increase of bargaining amount, the price of first hand houses began to touch the button and ascend again. At the same time, the average price of second hand houses reached 2759 yuan per square meters, up 4.8%.  

Why did the price of houses in Guangzhou begin to decline? 

During year 2003 and 2004, the price of houses in Guangzhou fluctuated all the time.  

According to the analysis of several people, because of the macro control adopted in the second half of year 2004, the financing activities of developers were blocked. As a result, the effect of macro control will be seen in year 2005 obviously. But there are still too many unpredictable factors. 

 On the whole, the growth of first hand market is slower than that of second hand market. The latter begins to be a spot in the region.  

The second hand market grew continuously 

In 2004, the price of housing market increased entirely and the average price of first hand houses grew by 18.8% compared with last year. Now only in Huadu District can people find the houses with the price below 2000 yuan per square meters. At the same time, the average price of second hand houses also grew by 4.9%. The price of both first hand and second hand in Dongshan District ranked the first place within all districts in Guangzhou. 

In 2004, the proportion of floor areas of first hand houses to second hand houses is 63 to 37. The second hand houses market of Yuexiu and Fangcun Districts occupied the biggest share of the market. Tianhe and Payu Districts became two magnates which occupied 40% of the market amount. In 2004, the bargain amount of these four districts will occupied nearly 70% of total market share. 

The problem that the citizens care about is whether the price of second hand houses can break through the amplitude of 35%. Now more and more owners of second hand houses wanted to sell their properties at a higher price according to the market situation, but at the same time they lost part of potential customers.

 The supply of the second hand houses increased continuously in 2005. Under this situation, if the market wants to attract more people to buy the second hand houses, the key action is to cut off the price. Normally, the acceptable price is between 2500 to 3500 yuan per square meters.  

 The amplitude of the average price of previously sold houses is 23.7%, 6.3%, 5.5% and 0.8% respectively. After three years’ steady development, the house market of Guangzhou will enter a new stage.