Arab Today, arab today correction in property market weighs on china\s growth
Last Updated : GMT 18:20:30
Arab Today, arab today
Arab Today, arab today

Correction in property market weighs on China\'s growth

Arab Today, arab today

Arab Today, arab today Correction in property market weighs on China\'s growth

Shabghai - XINHUA

The meteoric rise of the Chinese property sector has shown signs of abating since the beginning of this year, and economists say such a downturn could weigh on growth. The property sector accounts for at least 16 percent of China's economic output, according to brokerage firm Nomura Securities. Slowing investment growth and tightening credit conditions in the property sector during the first quarter of this year have already taken a toll on growth, which dipped to 7.4 percent in the first quarter, the lowest rate since the second quarter of 2012. "We are convinced that the property sector has passed a turning point and that there is a rising risk of a sharp correction," said Zhang Zhiwei, an economist with Nomura Securities in a research note earlier this week. Wang Tao, an economist with UBS, said in a research note this week that a sharper and more persistent downturn in the property sector is the biggest risk for China's economy in the next couple of years. Analysts say correction has already taken place in the property market and is set to continue throughout the rest of this year. Nomura noted that the downward trend, without intervention through policy easing, will drag economic growth below seven percent this year. SLOWING ACTIVITIES Behind Nomura's correction verdict is a fall in property investment. Growth of new housing starts, a leading indicator for property investment, fell 25.2 percent year-on-year in the first quarter. In addition to new housing starts, developers acquired less land in the same period than they did a year ago, though sales prices were higher. Nearly 60 million square meters of land were sold in the first quarter, down 2.3 percent year-on-year, while sales growth also slowed 11.4 percent from a year ago to 155.6 billion yuan, according to China's National Bureau of Statistics. Developers have also come under pressure from home sales. Home price inflation in 70 cities surveyed by authorities weakened in the first quarter while sales were down 5.2 percent to 1.3 trillion yuan. "We believe that the weak sales growth mainly reflects a genuine slowdown in demand rather than an unfavorable base effect," Zhang said. Nomura said the correction in the property market was triggered by monetary policy tightening that started in mid-2013. "For property developers, increased difficulties in getting bank loans, reliance on shadow bank financing and the rise in overall funding costs could lead to a sharper and quicker adjustment in property construction," Wang said in UBS's research note. China's property market started to regain traction after authorities moved to stabilize growth in mid-2012. As a result, pent-up demand unleashed by the rebound has pushed up housing prices by more than 20 percent in first-tier cities while those in second- and third-tier cities grew more moderately, according to UBS. While overall growth in home prices remains resilient, divergence has become more pronounced this year between first-tier cities, such as Beijing and Shanghai, and the rest of the country. Some developers have been forced to slash prices to reduce inventories in second- and third-tier cities. Some second-tier cities have already responded with moves to prop up local property markets. The eastern Chinese city of Wuxi in Jiangsu Province announced in April that it will grant urban residential permits to non-residents who purchase homes larger than 60 square meters. Three days later, Nanning, the capital of south China's Guangxi Zhuang Autonomous Region, also eased restrictions on home purchases for both residents in the city and those from five other cities in the province. Even in Beijing, potential first-time home buyers also found the Beijing Rural Commercial Bank offered preferential loan interest rates of 5 to 10 percent off, a rare practice in the city following government efforts in previous years to cool the property market and banks' cancellations of interest rate discounts. Though policy easing is already under way, analysts say the measures so far are meant to tackle issues in specific sectors, such as boosting railway construction and shanty town renovation. Bucking the downward trend in the property market will take more aggressive easing, which many economists say is still unlikely. "The important point is that the slowdown in the property sector is not constrained to merely a small number of cities or provinces, it is systemic," Zhang said, adding that previous easing measures are not enough to halt, let alone reverse, the downward momentum in the property sector and the economy. Meanwhile, UBS's Wang said authorities "have the willingness" to roll out additional measures to stabilize the property sector given its importance to the economy. One way to do that is to speed up social housing construction. At the March parliamentary session, the government made a target to start construction of 7 million affordable homes. She added that some second- and third-tier cities could further relax their household registration system to stimulate demand in the local housing market, saying such a move is also consistent with the country's urbanization drive. Nomura's Zhang also said the government could consider stimulating demand in the short term, but doing so does not help solve the structural oversupply problem. "Stimulating demand may put off any correction temporarily, but would likely exacerbate the problem in the long run. Painful adjustments in the sector seem inevitable," he said. Zhu Zhongyi, deputy head with the China Real Estate Industry Associations, believes the property market in the country is now shifting its gear from high-speed to stable growth. Following a series of government policies to restrain speculative investment and lowered market demand, potential house buyers have become more rational, he said. "The real estate policy is being improved, which is necessary for the establishment of a long-term mechanism to ensure the stable development of the sector," he said.

arabstoday
arabstoday

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today correction in property market weighs on china\s growth Arab Today, arab today correction in property market weighs on china\s growth

 



Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today correction in property market weighs on china\s growth Arab Today, arab today correction in property market weighs on china\s growth

 



Arab Today, arab today
Arab Today, arab today Arab tradition glitters in Colombia

GMT 12:59 2017 Thursday ,19 October

Arab tradition glitters in Colombia
Arab Today, arab today Second US judge orders freeze

GMT 08:04 2017 Thursday ,19 October

Second US judge orders freeze
Arab Today, arab today Etiquette expert underlines importance of gifts

GMT 17:52 2017 Sunday ,03 September

Etiquette expert underlines importance of gifts
Arab Today, arab today Silent Republicans have their reasons

GMT 16:55 2017 Thursday ,19 October

Silent Republicans have their reasons
Arab Today, arab today Hiring not part of Alibaba pledge

GMT 11:26 2017 Wednesday ,18 October

Hiring not part of Alibaba pledge
Arab Today, arab today
Arab Today, arab today
Arab Today, arab today Sidem reveals plan to improve education

GMT 15:52 2017 Friday ,06 October

Sidem reveals plan to improve education
Arab Today, arab today Ex-French minister Dati wants tough action

GMT 10:54 2017 Thursday ,19 October

Ex-French minister Dati wants tough action
Arab Today, arab today Climate-disrupting volcanoes helped topple

GMT 16:00 2017 Wednesday ,18 October

Climate-disrupting volcanoes helped topple
Arab Today, arab today The history of solar eclipses

GMT 05:16 2017 Sunday ,20 August

The history of solar eclipses
Arab Today, arab today Mercedes says recalls 400,000 UK cars

GMT 06:56 2017 Tuesday ,17 October

Mercedes says recalls 400,000 UK cars
Arab Today, arab today Britain's Vauxhall to cut 400 jobs

GMT 10:53 2017 Sunday ,15 October

Britain's Vauxhall to cut 400 jobs
Arab Today, arab today Hussein Fahmy happy for honoring in festival

GMT 07:47 2017 Tuesday ,17 October

Hussein Fahmy happy for honoring in festival
Arab Today, arab today Three killed, 360,000 without power

GMT 05:11 2017 Tuesday ,17 October

Three killed, 360,000 without power

GMT 09:31 2017 Monday ,16 October

Dalal Abdel Aziz happy for “Seventh Neighbor”

GMT 18:15 2017 Monday ,16 October

British actress becomes fifth woman

GMT 18:29 2017 Sunday ,03 September

Designer produced new set of ornaments

GMT 18:49 2017 Monday ,16 October

India to close colonial-era military farms

GMT 10:46 2017 Saturday ,05 August

Nanis reveals simple ideas for home renovation

GMT 23:42 2017 Monday ,16 October

Better Marriages Make

GMT 06:52 2017 Monday ,16 October

Airbus CEO says won't cling to job

GMT 17:12 2017 Monday ,07 August

Al-Shawaifi reveals secrets of total solar eclipse

GMT 03:59 2017 Sunday ,15 October

US mobile carriers Sprint, T-Mobile to merge

GMT 19:29 2017 Tuesday ,29 August

Yomna: decoration leaved positive effects
Arab Today, arab today
Arab Today, arab today
 
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube
arabstoday arabstoday arabstoday arabstoday
arabstoday arabstoday arabstoday
arabstoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabstoday, Arabstoday, Arabstoday