2014-07-23

Do Or Die Time For China's Real Estate Market

Home prices are coming down and if that trend doesn't stop soon, economic data is going to deteriorate in the second half. The September/October period looms large and it is premature to make a definitive call, but the data is still going the wrong way. If trends stay on course into the normally prime selling season and there's no improvement, there will need to be major downward revisions of Chinese GDP growth.

China real estate dominates the economy: official
About 60% of China's manufacturing and financing activities are related to the property sector, China's state media quoted a senior government economist as saying Monday.

China property chart du jour (yes, another one)
[Soc Gen] In summary, we think that real estate investment growth will continue to trend lower, likely to the level of 5% yoy (from 12.5% in June), a level last seen during the 2009 downturn. The IMF once estimated that a 1% decline in China’s real estate investment would shave about 0.1% off China’s real GDP within the first year. And so a 7.5ppt deceleration in real estate investment growth would drag down GDP growth by about 0.75ppt.
That is more optimistic than the Shenyin Wanguo analyst who predicted GDP would slip to 6.6% growth if real estate investment fell below 14% in 2014. A 0.75% deceleration in GDP growth stemming from a 7.5% drop in real estate investment is on the optimistic side.

聂梅生:楼市最低迷时期已过 (Nie Meisheng: The real estate bottom has passed) Nie Meisheng is the founder of the China Real Estate Chamber of Commerce. She sees prices stabilizing here. If she's right, that is good news for China's real estate sector and the economy. There's some evidence for that in still solid sales figures in some areas, and the national figure did begin ticking up in June (third chart below).

Now for some data from the NBS: June real estate investment figures. These are cumulative, yoy growth rates.

Real Estate Investment Growth Rate

Land purchases by developer (area)

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

Developer Capital



Table  2014 Year 1-6 month national real estate development and sales

Index
The absolute amount
Growth ( )
Real Estate Investment (100M)
42019
14.1
 Of which: Residential
28689
13.7
    Office
2394
19.0
    Commercial space business
6172
23.2
Housing construction area (10,000 square meters)
611406
11.3
 Of which: Residential
437195
8.3
    Office
24739
23.3
    Commercial space business
77445
18.5
New housing construction area (10,000 square meters)
80126
-16.4
 Of which: Residential
56674
-19.8
    Office
3098
3.2
    Commercial space business
10732
-8.9
Land acquisition area (10,000 square meters)
14807
-5.8
Land transaction price ($ billion)
4031
9.0
Housing area (10,000 square meters)
38215
8.1
 Of which: Residential
29168
6.3
    Office
980
14.0
    Commercial space business
4353
7.2
Real estate sales area (10,000 square meters)
48365
-6.0
 Of which: Residential
42487
-7.8
    Office
1090
-2.8
    Commercial space business
3300
7.7
Commercial sales ($ billion)
31133
-6.7
 Of which: Residential
25632
-9.2
    Office
1331
-12.1
    Commercial space business
3373
9.8
Housing for sale (10 000 sq.m)
54428
24.5
 Of which: Residential
35917
25.0
    Office
2135
20.6
    Commercial space business
10355
23.4
Real estate development enterprise funds available ($ billion)
58913
3.0
 Of which: domestic loans
11293
14.1
    Use of foreign capital
186
-20.6
    Self-financing
23810
10.1
    Other funds
23624
-7.2
     Of which: deposit and advance payment
14252
-9.3
        Individual mortgage loans
6512
-3.7

 
Table  2014 Jan-Jun East-Central-West RE Development Investment

Land  area
Investment 
(100 million)
 
An increase 
)
 
Residential
Residential
Total national
42019
28689
14.1
13.7
  Eastern Region
24223
16382
14.6
14.1
  Central Region
8558
6070
11.9
13.7
  Western Region
9237
6237
14.8
12.8

Table  2014 Jan-Jun East-Central West RE Sales

Area
Real estate sales
Commercial RE sales
Absolute 
(10,000 square meters)
An increase 
)
Absolute 
(100 million)
An increase 
)
Total national
48365
-6.0
31133
-6.7
  Eastern Region
22630
-13.3
18051
-14.0
  Central Region
12987
1.8
6511
5.7
  Western Region
12747
1.4
6571
5.5



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