China: Signs of stabilisation for housing - Westpac

Elliot Clarke, Research Analyst at Westpac, explains that the Chinese house price update for November is very similar to October’s report, albeit with a little more momentum in the established market.

Key Quotes

“A net 57% of cities across both new and existing housing experienced price gains in the month. That compares to 51% and 39% respectively in October.”

“For new housing, there was very little change in the annual growth figures across the three tiers. Tier 1 growth was again little better than flat, 0.7%yr. Meanwhile, tier 2 and 3 continued to show robust momentum, tier 2 edging higher from 5.2% to 5.4% as tier 3 ticked down from 6.1% to 5.8%.”

“Within tier 1, there was a greater sense of stability, the annual rates little changed. This was true from Shenzhen (–3%) to Guangzhou (7%). The range of outcomes across tier 2 and tier 3 remain diverse, tier 2 seeing outcomes between –1% and +12%, and tier 3 from –2% to +14%.”

“Established market outcomes for tier 2 and 3 are very similar at 6% and 5% respectively. But, for the established market, tier 1 has held up better, +3%.”

“The investment detail continues to point to a loss of momentum into 2018, with sales and starts trending down as the growth rate of floor space under construction remained relatively stable.”

“However, given the still-significant development yet to be undertaken across the nation, there is a lower bound to this downtrend – particularly in the outer tiers.”

“Developers continue to bid strongly for future development sites, showing their confidence in the outlook. China’s households are also lightly levered versus their developed-world counterparts. The consequence is structural support for housing demand as well as supply.”

“Through 2018 and 2019, we anticipate a more modest but still positive pace of housing investment growth across the nation.”

“This will be complemented by further subdued investment by the public sector in essential infrastructure. The net effect for GDP growth is that we anticipate gains of 6.2% and 5.9% in 2018 and 2019, from 6.8% in 2017.”