China’s Property Problems

The growth in China’s property sector has been substantial in the course of the last 15 years. This has been fed by the country’s rapid urbanisation and, more worryingly, by speculation as households seek higher returning assets.

“According to the International Monetary Fund (IMF), the industry as a whole accounts for an even larger 15% of 2012 GDP, 25% of fixed asset investment, 14% of employment in urban areas and 20% of bank loans in the economy.” - By James White, Analyst, Colonial First State

Below summary from Anthony O'Brien

The growth in China’s property sector has been substantial in the course of the last 15 years. This has been fed by the country’s rapid urbanisation and, more worryingly, by speculation as households seek higher returning assets.

In 2014, however, there has been a substantial decline in prices and, increasingly, fixed asset investment in property.

A number of signposts point to a property slowdown. Sales, for example, are a strong indicator of future activity levels – and in China, property is usually pre-sold to allow developers to finance construction. There was a steep rise in sales after the financial crisis, followed by a period of weakness, before a period of solid sales through 2012 and much of 2013.

This strength has since turned to weakness, with little evidence that there is a coming turnaround. Yet some of the private data, however, does suggest some strength in large cities in recent months.

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