Hangzhou, Chongqing, Xian, Wuhan . . . driving through China's second- and third-tier cities for the past couple of years, it's been hard not to think about bubbles when you look out the car window and see rows of cranes and hulking ghost buildings dotting the outer limits of these booming conurbations.
One of the biggest films in China this week is called Temporary Family and it's about real estate.
Is China’s property bubble bursting as we speak? It’s a frightening prospect, as economists reckon property accounts for a quarter of the country’s gross domestic product. Serious downturn in China has implications for the whole world.
The apartments certainly have been built, but the property market has been slow on the uptake this year, and the glut of apartments has forced developers in these cities to cut prices. And banks, fearful of a wave of bad loans, are cutting back on mortgages. New construction has also fallen off sharply.
Housing sales, in terms of value, fell 10.5 per cent in the period from January to July year-on-year.
The focus of most concerns about the world’s second-largest economy as we head towards the end of the second half of the year, is that property is in the doldrums.
Average prices
Data from the
China Real Estate Index System
(Creis) showed weak momentum in the property market continued for the fourth month in a row. Average prices in 100 of the biggest cities fell 0.6 per cent in August from July to 10,771 yuan (€1,335) per square metre. The price slipped 0.81 per cent in July, 0.5 per cent in June and 0.32 per cent in May, the first month-on-month drop since June 2012.
In the 10 largest cities, the average price of a new home fell 0.53 per cent to 19,226 yuan per square metre in August, compared with a 0.97 per cent drop in July and a 0.45 per cent slip in June. Seventy-four cities saw prices drop, including all top 10 cities, such as Beijing and Shanghai, while prices rose in the remaining 26.
House prices were up 3 per cent in August compared with a year before, Creis said, although the increase was smaller than July’s 4.7 per cent.
"The property market was in a downtrend in August," Creis, a consultancy linked to China's largest property data provider, Soufun Holdings, said in a statement.
‘Reasonable prices’
“With the peak season for supply coming in September and
October
, developers’ promotions and more reasonable prices will attract home buyers to enter the market,” Creis said.
Another survey, by the real estate services firm E-House China Holdings, showed prices of new homes in 288 cities fell 0.3 per cent in August from July, the fifth consecutive drop on a monthly basis.
Most of the 288 cities monitored by E-House China have never imposed such restrictions, but they are suffering even more from oversupply owing to limited demand as the younger generation moves out for better jobs in regional hubs, the South China Morning Post reported.
More than 80 per cent of 46 second- and third-tier cities have eased restrictions on buying homes, as local governments take steps to boost short-term demand. Having sold the land, they need the developments to work, to guarantee their investment and also to keep social unrest at bay. rebound would boost confidence.
Also, this month and October are traditionally the best time of year for buying property, and even a seasonal, short-term rebound would boost confidence. The government is due to publish its August property price data for 70 of the biggest Chinese cities on September 18th.
Last week's PMI readings indicated that economic activity softened further in August. The official manufacturing PMI for August came in at 51.1, down from 51.7 in July, and marked the first fall since February. "The weakness should not be cause for significant concern since it reflects a welcome correction in sectors such as real estate, which have suffered from overinvestment," said Capital Economics analyst Julian Evans-Pritchard. "The risk of an imminent hard landing appears small and although policymakers have so far stopped short of the kind of stimulus likely to drive another rebound, we do expect them to continue to fine tune policy in order to prevent a sharp drop off in growth."
