No clear direction for China’s housing market

BOFIT Viikkokatsaus / BOFIT Weekly Review 2015/47

The tracking of average housing prices last month in 99 Chinese cities by the private real estate portal SouFun indicated a modest sustained increase in housing prices since last spring. The trend was uneven, however, as prices declined in about half of the tracked cities and price drops affected more cities than in September. Housing prices mostly rose in China’s largest cities. Official figures on price trends comport with SouFun’s findings.

Even if official figures indicate that support measures for housing markets reversed the first-half drop in volume of apartment sales, the overall outlook for the housing sector looks rather bleak when investment figures are included. Measured in liveable floorspace, the volume of new housing starts in January-October was down 15 % y-o-y. Plot purchases of builders this year are down a third from last year. 

The importance of the real estate and construction branches to the overall economy is accentuated by the fact that companies in the field are deeply indebted. As such, the sector still constitutes a major threat to the overall economy. 

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