Signs of life are emerging in China’s moribund property sector. FP Trading Post minces no words as it explains how it happened.
It writes that authorities put the knife to property speculation last year by hiking interest rates and choking off loans to home buyers.
Property developers were hung out to dry in an ill-timed move by authorities given the early signs of problems in the developed economies.
Authorities have been directing funds to the property sector in a 180 degree policy turn since last year, and early signs are encouraging.
Christopher Wood of brokerage firm CLSA based in Hong Kong, said, ‘Average daily sales of new flats in Beijing, Shanghai and Shenzhen rose by 51%, 50% and 40% MoM respectively in the first week of March’.
Both prices and mortgage costs are down so home affordability is up.
Supply overhang needs to be worked off, and that will take some time. Roughly 14 months of inventory overhang remained in January on a national basis according to Macquarie Research.
In Beijing, the problem is acute with nearly 33 months of supply overhang in January suggesting no new homes need to be built for some time.
Still, a rebound in housing demand on the margin is further evidence that China’s domestic economy is bottoming and is likely to assume the leadership position for the global economy this year and next.