Remember all that stuff we’ve been saying about Chinese property? How it’s really, really important? We’re hardly the only ones, either.
Bloomberg View’s Michael McDonough has done another of his handy charts on the latest city-by-city sales price data. The green is nearly all gone in December:
Of course that’s just one slice of data, and doesn’t tell us various important things such as sales volumes or the numbers offered for sale, which could be particularly revealing regarding whether those who already own investment apartments are beginning to sell. Or how fast the central government’s much-touted social housing expansion might be progressing.
A whole stack of official data has taken care of (most of) that, however.
Statistics published on Tuesday showed growth in real estate investment in December slowed to its lowest rate in a year; actually falling year-on-year during that month. From Reuters:
Property investment grew 12.3 percent from the same month a year earlier, down from an annual rise of 20.2 percent in November and 25.0 percent in October and September, according to Reuters calculations based on official data released on Tuesday.
And then, aggregate new home prices:
Average new home prices across China dropped 0.3 percent in December from the previous month, deepening from a decline of 0.2 percent in both November and December, according to Reuters weighted house price index based on official data released on Wednesday.
Again from Reuters,
“If they build the same amount (in 2012) that they did last year, which is still a phenomenal rate of construction, then it would take GDP down to 6.6 percent,” said Patrick Chovanec, an economist who teaches at Tsinghua University’s School of Economics and Management in Beijing.
That would be a dramatic slowdown from 2011′s 9.2 percent growth, and it doesn’t even include potential indirect impacts that typically come with a housing slowdown, such as falling demand for building materials or a rise in banks’ bad debts.
IHS Insight’s Alastair Thornton and UBS’ Tao Wang are also quoted:
Thornton thinks 2012 growth will dip to the 7.5 percent to 8 percent range, largely because of the housing slowdown. But he said it could easily drift down to 7 percent if China chooses not to prop up the property market.
UBS economist Tao Wang predicted property investment growth would halve in 2012, less dire than Chovanec’s prediction for a flat reading. That leaves GDP right around the 8 percent mark.
Back onto those flow-on effects that Patrick Chovanec mentioned, but did not include in his estimates. Societe Generale’s Wei Yao writes (emphasis ours):
Today’s report is consistent with the unambiguously deteriorating trends seen in property sales, construction, starts, and investments. The data just turned from bad to worse. The economy as a whole has not felt much chill yet, but H1 2012 is going to be difficult for not just property developers. Contraction in sales and sharp deceleration in investments will send shockwaves along the industry chain, which is expected to drag the overall growth below the 8% mark in H1 2011.
(Note that this is sequential growth, and not year-on-year. SocGen are still forecasting an 8.1 per cent growth rate, year-on-year, for H1.)
And for second-hand properties, which Patrick Chovanec has tagged as a big question about the country’s property sector, the signs are not great either. In Wenzhou (admittedly, this city has a long history of non-standard financing), Wei points out that secondary prices in the month of December showed a 4.9 per cent mont-on-month decline — or 45 per cent, annualised. Which is about double the price decline rate of new homes…
Related links:
China’s GDP growth, through stimulus-tinted glasses – FT Alphaville
China’s real estate crash - Patrick Chovanec
Chinese property: A lofty ceiling- FT
China’s local governments dig deeper – FT Alphaville