Is real estate China’s life raft in a turbulent economy?
Is real estate China’s life raft in a turbulent economy?
Chinese economists can still smile about a resilient property market
2016 is halfway over, but there’s no reason to count China out yet. With its back against the wall economically, the Middle Kingdom seems to still have its property market for a saving grace.
In a new report by the Financial Times’ (FT) Confidential Research team, the stabilisation of the Chinese economy looks set to cautiously proceed due to rebounding real estate investment. Year-on-year growth in home sales will likely moderate in the remaining months of the year, the report suggested.
Rapid mortgage lending is apparently a redeeming point. “Assuming that the government does not sharply curtail mortgage access or dramatically raise downpayment requirements, real estate investment is likely to remain relatively buoyant for the remainder of the year. This should at least help cushion the slowdown evident in other areas of the economy,” the researchers wrote.
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Property developers seem to have cause for cautious optimism, as shown in a spike in home sales in 30 major Chinese cities in the week ending July 3. The report also expects housing starts and other construction activity to follow the trajectory of residential sales, which had been projected to grow since April.
The FT believes the Chinese government would find little incentive in further credit tightening, given lingering apprehensions among investors over the ‘Brexit’ vote and the improbability of a Federal Reserve rate hike. In any case, lenders surveyed by FT in June reported that mortgage discounts, some as high as 90 to 100 percent of the benchmark interest rate, are still available far and wide.
Mortgage loans climbed to CNY528.1 billion (USD78.8 billion) in May.
Still, the central bank will likely continue imposing cooling measures on first-tier cities, which are contending with runaway price increases as opposed to excess inventory in lower-tier markets.
The measures have seemingly taken effect, with monthly price growth across 100 cities standing at 1.32 percent in June, compared with 1.9 percent in March, FT reported.
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Source: Property Report