2014-06-13

Real Estate Investment Slows in May

China's property investment slows; sales, new construction drop in May
Real estate investment, which affects more than 40 other sectors from cement to furniture, rose 14.7 percent in the January to May period from the same period a year ago, down from an annual rise of 16.4 percent in the first four months, official data showed.

Newly started property construction fell 18.6 percent in the first five months from a year earlier, the fourth consecutive period of decline.

Analysts predicted the worst is yet to come.

"The trend of slowing property investment growth is likely to continue in coming months as more and more home buyers stay the sidelines," said Tang Jianwei, an economist at Bank of Communications in Shanghai.

In late May, I posted Real Estate Depression Starts A Chain Reaction; Steel, Cement, Glass and Electricity All Slowing
A Shenyin Wanguo analyst estimates that if real estate investment growth falls to 14% this year and there is no government intervention, GDP growth will slow to 6.6%, almost a full point below government targets.

At the current pace, this figure could easily fall below 14% growth when the June report comes out next month.

Here are some charts, followed by a breakdown of the data. (Source: 中国1-5月房地产开发投资增长14.7%) Note that the growth rates are a running cumulative total for each month.

Real Estate Investment Growth

Land purchases by developers (by area)

New Home Sales By Area (yellow) and Yuan (blue)

Developer Capital
Jan-May real estate development enterprise funds available ¥4.7 trillion, an increase of 3.6% , down 0.9 percentage points from the Jan-Apr total. A breakdown of the financing: domestic loans ¥938 billion yuan, up 16.5 percent; foreign investment ¥150 billion, down 24.5%; self-funded ¥1.8 trillion, an increase of 9.8%; other sources ¥1.9 trillion, down 6.4%. In other funds, deposits and advance payment ¥1.1 trillion, down 8.4%; individual mortgage loans ¥534 billion, down 1.2%.

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