About these “Signs of Hope” in the Chinese Housing Market

“Signs of hope in China home price data,” is what CNBC called it today.

Prices of new homes in China fell 5.7% year over year in May, after diving 6.1% in April. But here they are, the “signs of hope”: month on month, prices ticked up 0.2%, the first rise after a relentless slide that had started in April 2014.

Year over year, prices dropped 2.3% in Shanghai and Beijing in May, compared with 4.7% and 3.2% respectively in April. So things are looking up. And in Shenzhen, home prices jumped 7.5% year over year. So the rosy scenario is already on the horizon again.

“What we see in the tier one and two cities is a recovery in volumes, and prices are creeping up, but on the other hand, tier three and four cities, given the oversupply situation, are still at the bottom,” Wee Liat Lee, regional head of property research at BNP Paribas, told CNBC.

The property market has “bottomed out,” he said. But the recovery was dual-paced. “We are not seeing prices dropping, but we are seeing a floor after the government’s support to stimulate the market,” he said.

Maybe.

But also today, Bank National Financial Markets Senior Economist Krishen Rangasamy, in Canada, had a slightly more cautious view, introduced with this relentlessly terrible chart of the China Real Estate Climate Index at its worst level since the Asian Financial Crisis in 1998:

China-real-estate-climate-index-2016-06

In the bank’s Monthly Economic Monitor, Rangasamy writes:

China is another source of uncertainty for the world economy. With its policies aimed at rebalancing the economy towards consumption and away from exports, Beijing has decided to sacrifice near-term growth for more sustainable growth over the longer term. But unexpected headwinds including slower global growth and a moderation in domestic demand are complicating matters….

The unregulated shadow banking sector is also a concern given the lack of credible information about its size and exposure to a sinking real estate market. The latter’s continued deterioration despite extraordinary support from monetary and fiscal stimulus is concerning. We now expect the fallout from the real estate drop to weigh more significantly on the economy next year….

So the jury will be arguing over this for a while. But real-estate busts have a nasty habit of showing false bottoms and ticking up occasionally to confound the hard-landing gurus and give folks some hope to hang on to. Sometimes it works out, sometimes it doesn’t.

But there are other indications that this time it’s going to be tough. Read…  “China Momentum Indicator” at Hard-Landing Level

Share on FacebookTweet about this on TwitterShare on LinkedInShare on RedditPrint this pageEmail this to someone

  4 comments for “About these “Signs of Hope” in the Chinese Housing Market

  1. michael
    Jun 18, 2015 at 3:30 pm

    That trend does not look very friendly. Hopefully the bay area housing will have a similar trajectory

    • Vespa P200E
      Jun 18, 2015 at 8:09 pm

      I live in the bay area and housing on my neck of the woods are 10 to 20% above the 2007 peak. Wolf reported that housing in the city is like 50% above 2007 peak?

      Yep seen this movie before in the early 90’s in LA, 2007 and 2015. Something tells me the RE monster will rear its ugly head and the RE market come back to earth. And like 2007 the equity bond markets are in stratosphere too.

    • Sabbie
      Jun 19, 2015 at 10:11 am

      Not likely. The 2008 crash was pretty unique in that real estate itself was the inflated asset class. Today real estate just being led by the nose by the other inflated assets. Look back on the Dot Com bust in 2001, home prices barely came down, maybe 10%. That scenario is much more likely. Also, with about a quarter of the homes being bought with cash, lots of large down payments, and relatively tight lending, you won’t see nearly as many defaults.

  2. Vespa P200E
    Jun 18, 2015 at 8:05 pm

    Uh oh – dejavu Japan in 1989 when the roaring housing and stock markets in unison crashed. There comes a point where the greater fool theory kicks into play with dearth of muppet lemmings learn about the supply & demand and lest we forget the Ponzi scheme.

    On the other news Chinese stock market has gone no where in past month but churning at the all time high while the margin debt is at record with people of all genres and income enjoying the Chinese fave past time of gambling.

    We learn history so as to learn from it and not repeat it…

Comments are closed.