China housing market slumps again as another developer runs into trouble
China’s giant housing market has continued to decline in the past month and another major developer showed signs of financial distress as state-owned enterprises began carving up the carcass of the failing property giant Evergrande.
House prices, sales, investment and construction data released on Wednesday all showed renewed signs of the crisis in the market, which accounts up to 30% of the country’s output and which appears certain to drag on the world’s second biggest economy.
It comes a day after shares in one of China’s largest developers, Shimao Group, fell 20% on concerns that it was offloading assets to manage its spiralling debts.
New home prices fell 0.3% month-on-month in November, the biggest decline since February 2015, according to Reuters calculations. The figure was worse than the 0.2% drop in October and only nine of 70 cities tracked by the Chinese statistics bureau saw monthly price gains in November, the fewest since February 2015.
The actual value of home sales plunged by 16.31% in what was a fifth straight month of decline, official data showed. New construction starts as measured by floor area fell 21.03% on year in November, down for the eighth month, while property investment by developers fell 4.3%.
“Cities of all classes are under pressure,” said Yan Yuejin, director of Shanghai-based E-house China Research and Development Institution. “The current scale of market supply is large and demand is weak. The key is to accelerate inventory de-stocking to stabilise home prices.”
However, more data released on Wednesday showed that weak demand for houses was in line with other metrics across the whole Chinese economy.
Real retail sales increased by just 0.5% on an annual basis – down from 1.9% in October – to give the weakest outcome since August 2020, and far below pre-Covid levels as consumers remained cautious and Covid outbreaks continued to cause snap lockdowns.
Passenger traffic data suggested that people were not travelling and spending as much, and sales during the annual November 1-11 shopping festival – China’s answer to the US “Black Friday” consumer spree – slowed compared with the previous year.
Industrial output picked up last month after power shortages eased from the previous months but economists said the overall picture was becoming more bleak.
Gerard Burg of Westpac in Australia said there was little sign of improvement in underlying economic conditions in November and was cutting the bank’s forecast for China’s economy.
“Overall, growth in industrial production was only marginally stronger, investment trends remained extremely weak and retail sales data point to minimal consumption growth,” he said.
China unveiled a package of measures earlier this month in order to bolster the struggling economy, including freeing up banks to lend more money to targeted businesses.
Many economists expect the central bank to reduce the main interest rate from its current 3.85% – very high compared with every major western economy – and more fiscal measures to boost economic activity are also seen as likely in the new year.
However, the crisis engulfing the property market looms over the economy in the wake of the default last week of China Evergrande, once the country’s second-biggest property developer. It finally succumbed to its $300bn debt mountain when it failed to come up with $82m owed to offshore creditors, and analysts have said a huge restructuring effort is now underway. Read More…
