Q1 housing starts plunge to lowest since 2012
Figures published today by the Central Bureau of Statistics show that housing starts fell 14.6% in the first quarter of 2018 in comparison with the fourth quarter of 2017 and 34% in comparison with the first quarter of 2017, Reuters reports.
The trend in housing starts, which has now been downward for an entire year (including revisions of the data), accelerated in the first quarter of 2018.
The decline in housing starts comes as no surprise, particularly in view of the fact that the buyer fixed price plan is having a greater effect on the housing market than its effect on housing prices. The reason is that all of the state land tenders have been marketed through the government program for almost three years, causing a considerable number of large, medium-sized, and small companies to withdraw from the market.
At the same time, a considerable number of contractors seeing the investors' negative sentiment, the downtrend in housing prices according to the Central Bureau of Statistics, and the substantial drop in housing purchases by overseas residents are in no hurry to start new projects.
The decline in housing starts also indicates that licensing and construction procedures in the buyer fixed price plan are taking a long time. The government project has already yielded over 50,000 discount apartments in tenders closed and purchased by contractors, but actual construction has begun on only a small number of them. The local authorities are not always eager to grant building permits, and actual construction of quite a few projects has yet to begin.
Housing completion figures are still rising at the annual level. To the extent that the number of deals in the market remains low, this could push housing prices further down, especially in places where the buyer fixed price plan is pushing ahead in large volumes and is affecting the surrounding market.
At the same time, the figures for the first quarter of 2018 show a clear fall in this aspect, in addition to the figures for active construction. This could be a result of the prolonging of construction processes, but also from the prolonging of sale processes in projects resulting in slower progress in construction itself.