Tag: real estate

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China holds its head above water

A quick snapshot from the latest RBA chart pack.

Manufacturing is holding its head above water (50 on the PMI chart) and industrial production shows a small upturn but investment growth is falling, as in many global economies including the US and Australia. Retail sales growth has declined but remains healthy at 10% a year.

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Electricity generation continues to climb but steel, cement and plate glass production all warn that real estate and infrastructure development are slowing.

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Interest rates remain accommodative.

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Real estate price growth is slowing but remains an unhealthy 10% a year. Real estate development investment rallied in response to lower interest rates but is clearly in a long-term decline.

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There are no signs of an economy in immediate trouble but there are indications that the real estate and infrastructure boom may be ending. Through a combination of fiscal stimulus and accommodative monetary policy the Chinese have managed to stave off a capitalism-style correction. But failure to clear some of the excesses of the past decade will mean that the inevitable correction, when it does come, is likely to display familiar Asian severity (Japan 1992, Asian Crisis 1997).

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Has the Chinese government given up on rebalancing already?

Zarathustra: As more and more evidence suggests that the Chinese economy is slowing rapidly, there is also more and more evidence that the Chinese central government has given up on real estate market curbs even though they say they will continue, and they have given up cleaning local government debts even though they said they were cleaning them up. And by giving these up, they have also unofficially given up on rebalancing the economy away from investment driven to consumption driven once more.

via Has the Chinese government given up on rebalancing already?.

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China Pins Hopes on Public Housing – WSJ.com

One of the biggest public-housing projects in history will help determine whether China can remake its real-estate sector fast enough to prevent its economy from flaming out.

China is in the midst of a crash program to build 36 million subsidized apartments by the end of 2015—enough units to house the entire population of Germany. The goal is twofold: to head off social unrest by ensuring decent places to live for low-wage workers, but also to cushion an expected fall in high-end construction—the result of policies to tame property speculation—by ramping up construction at the low end: so-called social housing.

via China Pins Hopes on Public Housing – WSJ.com.

Comment: ~ This is good news for iron ore and (coking) coal miners in Australia and Brazil: steel prices should recover.

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China’s Real Estate Bubble May Have Just Popped | Foreign Affairs

Sudden, steep price reductions are upending real estate markets across China. According to the property agency Homelink, new home prices in Beijing dropped 35 percent in November alone. And the free fall may continue for some time. Centaline, another leading property agency, estimates that developers have built up 22 months’ worth of unsold inventory in Beijing and 21 months’ worth in Shanghai. Everyone from local landowners to Chinese speculators and international investors are now worrying that these discounts indicate that “the biggest bubble of the century,” as it was called earlier this year, has just popped, with serious consequences not only for one of the world’s most promising economies — but internationally as well.

via China’s Real Estate Bubble May Have Just Popped | Foreign Affairs.

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Westpac bulletin: Consumer sentiment falls

Westpac Melbourne Institute Index of Consumer Sentiment fell by 8.3% in December…….

Risk aversion increased markedly in this survey. When asked about “the wisest place for savings” 26.6% of respondents nominated “pay down debt”. That was an increase from 18.7% in September. Since we started measuring that component in 1997 there has only been one higher measure, in March 2010. Only 6.6% of respondents nominated equities – the lowest percentage since 1993; while the 14% nominating real estate was, apart from 2008, the lowest since the survey began in 1974.

Comment: ~ Equities at their lowest level since 1993 is a great contrarian indicator. There is still risk of further downside, so too early to invest at present, but this will be a good number to watch in 2012.

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Auditor Says F.H.A. Could Need Bailout – NYTimes.com

WASHINGTON — The Federal Housing Administration has a “close to 50” percent chance of requiring a bailout if the housing market deteriorates next year, the agency’s independent auditor said in a report released Tuesday.

The F.H.A., which offers private lenders guarantees against homeowner default, has just $2.6 billion in cash reserves, the report found, down from $4.7 billion last year.

The agency’s woes stem from the national foreclosure crisis. In the last three years, the F.H.A. has paid $37 billion in insurance claims against defaulting homeowners, shrinking its cash cushion.

via Auditor Says F.H.A. Could Need Bailout – NYTimes.com.

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China will not ease up on realty – macrobusiness.com.au

Although there has been some noise about easing real estate curbs amid recent aggressive price cutting and subsequent protests, Li Daokui’s [academic advisor and member of the monetary policy committee of the People’s Bank of China] view is consistent with Premier Wen Jiabao’s view that curbs will be remain in place. He believes that economic growth will slow, and the growth model which relies on real estate development will end.

He added that inflation in China will probably fall from about 5.5% for this year to just 2.8% next year…..

via China will not ease up on realty – macrobusiness.com.au | macrobusiness.com.au.

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China property developer warns on price falls – FT.com

China Vanke, the country’s biggest developer by market share, said government efforts over the past year to rein in soaring prices were having a severe impact on the market and developers were being squeezed after sales volumes in 14 of the country’s largest cities halved in September from a year earlier.

“We can see a trend of declining sales, especially in the major cities,” Shirley Xiao, executive vice-president at China Vanke, said on a conference call with investors on Tuesday. “Prices have begun to decline little by little so we think even buyers who are able to buy will choose to wait for now because they’re targeting even lower price cuts.”

via China property developer warns on price falls – FT.com.

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