We read a number of commentaries on the Chinese market, to the effect that their economy is slowing down exactly as planned, and that it will have a soft landing before starting to grow again.
So, to provide some contrast, I’ve reproduced below an analysis of the real estate market as produced in “Mish’s Global Economic Trend Analysis” of which I’m a regular reader. It does not, however, make for pleasant reading, though I wouldn’t necessarily draw the conclusion that the market is about to crash. The Chinese government has proven capable, time and again, of micro managing the economy and finance to produce a desired result, and we could expect them to try to manage these problems also.
This is the extract:
“Developers, burdened by 70% leverage ratios and loans threatening to come due, rushed to complete projects already in their pipeline, to put those units onto the market and raise cash.
That rush to complete inflated real estate investments, allegedly up 23.5% in the first quarter. Other statistics from the report tell the real story.
§ Year-on-year sales in Q1, for all real estate, was down 14.6%.
§ Residential property sales were down 17.5%
§ Office sales were down -10.2%
§ Sales in January-February were a disaster, falling 20.9% overall, compared to the first two months of 2011, -24.7% for residential.
§ Total amount of floor space “for sale” was up 35.5%, compared to the same date last year
§ Floor space of residential units “for sale” grew 47.4%.
§ At the end of 2011, total floor space “under construction” was roughly 4.6 times the floor space sold
§ A year and a half worth of excess inventory is hidden somewhere in the pipeline
§ New starts in April fell 14.6% year-on-year and 27.0% month-on-month, for property as a whole
§ Housing starts fell -14.4% year-on-year and -23.4% month-on-month
§ Office starts fell -21.0% year-on-year in April, and -45.1% compared to March
§ Retail property starts fell -18.7% year-on-year, and -36.8% compared to March
§ Land sale revenues in April (RMB 27 billion) were down -54.7% compared to April last year
§ Foreign funding for property development was down -91.4% in March and -80.8% in April, compared to the same months last year.”
For more, see http://globaleconomicanalysis.blogspot.com.au/
