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China’s national real estate development continues 17-month drop shrinking over $20 billion YoY

China's national real estate development continues 17-month drop shrinking over $20 billion YoY
Dino Kurbegovic

While most of the attention regarding China is related to the more recent Covid lockdowns in Shanghai and Beijing, the slump in the housing market observed since January of 2021 will most likely have more severe implications.  

The growth rate of investment in real estate development has been falling steadily since January 2021, with national investments in real estate development from January to May of this year being at 5,213.4 billion yuan (~$778 billion).

This recent slump equates to a 4% drop year-on-year (YoY), among which the residential investment dropped by 3%, or 3,952.1 billion yuan (~$591 billion), according to the National Bureau of Statistics of China. 

The growth rate of real estate development in China. Source: National Bureau of Statistics of China 

Meanwhile, this YoY decline of 11 months straight represents a record since China created a private property market in the 1990s.  

Real estate climate index downturn 

Similarly, sales of commercial housing declined by 23.6% with the residential sales area decreasing by 28.1%. Along with this slump at the end of May, the area of commercial housing for sale increased by 8.6% YoY.

Growth rate of floor space for commercial buildings. Source: National Bureau of Statistics of China 

In short, real estate development enterprises paid 6,040.4 billion yuan (~$903 billion) a YoY decline of 25.8%, with domestic loans decreasing by 26%; however, the foreign capital utilization was up 101%. Further, the prosperity index of real estate development was 95.60.

National real estate climate index. Source: National Bureau of Statistics of China 

Finally, the property market decline in China is expected to hit China’s growth by roughly 1.4% this year, which should be slightly less than the impact the policies around the control of Covid caused. 

It seems as if the Chinese government will try and offer more incentives to their people to buy homes all with the goal of staving off an economic downturn even if it means piling on more debt.

After all, a strong property market should support a strong economy and help foreign capital to flow more freely into the country. 

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