China Wet Market: Real estate market continues to rally

China’s wet market is expected to grow at an annualized rate of 30% in the first quarter of 2018, according to a new report by the Chinese real estate brokerage CBRE.

Chinese real estate brokers CBRE have predicted the Chinese market will expand at an average annual rate of 28% by 2020.

That compares with an average growth rate of just over 12% for the U.S. market in that same period.

The China-focused brokerage has been a strong performer in the Chinese housing market, with a strong growth rate in the second quarter.

CBRE is a leading source of Chinese investment advice, with assets under management of more than $5.7 trillion and revenues of more then $1.5 trillion.

The firm also serves clients in the U, U.K., Germany and France.

CBre said China’s domestic real estate is currently undergoing “unprecedented transformation,” with Chinese households increasingly moving to cities and apartments. 

“In 2018, domestic realtors have become a leading player in the market and are leading the way,” CBRE President and CEO Li Jun said in a statement.

“Our clients and employees have come to expect more value, quality and service from CBRE than any other broker.”CBRE, which has more than 100,000 members in China, forecast Chinese housing demand to reach a record 3.4 million units by 2022, up from 1.8 million units in 2018. 

According to CBRE, the domestic housing market is likely to remain volatile in the coming years, with the price of real estate prices in China likely to decline.

In 2018, CBRE expects housing prices to decline by 9.5%, compared to a 3.5% drop in 2019. 

The CBRE report noted that while China’s residential real estate sector has continued to grow, domestic housing markets are becoming increasingly unaffordable for the average Chinese household. 

For instance, the average housing price for a one-bedroom apartment in China in 2019 was 5.1 million yuan ($77,000), which was less than half of the average price of a one, two-bedroom home in the United States, according the CBRE research. 

As a result, the CBre report noted, domestic market participants may choose to sell off their homes in the 2020s and look for alternatives in the future. 

 China’s home prices have also been on a downward trend since 2018, with house prices rising for the first time in a year in 2019, according CBRE data.

In fact, CBre found that the number of new home sales in China was down 17% from the previous year, and new home prices in 2020 fell 10%. 

The firm noted that there are currently about 5.3 million people in China with an income below $100,000, which is roughly equivalent to the population of Dallas, Texas. 

While China is a relatively large market with more than 400 million people, CBRe said that domestic housing prices have fallen in most major cities over the past five years.

The brokerage expects the Chinese economy to contract in 2020 and 2021, with an annualised rate of 3.6% in 2020, compared to an annual rate in 2021 of 4.6%. 

However, the China housing market has become much more competitive than it was in previous years, according Toong-Chih Lim, the founder of CBRE China, and noted that some Chinese cities are now seeing an increase in demand for properties. 

He said the market has experienced a “great leap” in the last two years, adding that the Chinese are now more willing to pay a premium for properties, with prices in some cities having risen as high as 400% over the last three years. 

Lim also said that the current housing market in China is not sustainable for long, with real estate markets continuing to “deteriorate in both quantity and quality.”