Signs of recovery for Chinese real estate

The health of the Chinese real estate market is a critical indicator for the overall Chinese economy. According to many recent reports, it is showing signs of a rebound.

Image Courtesy Nigel Jones:

Chinese real estate is on the rebound.

The Chinese real estate market has been a big part of China’s economic growth. For the last few months, it has been in a slump. There has been much debate about whether this slump is a “hard landing” or a “soft landing” for the Chinese economy.

There seems to be good news now though. A recent survey of Chinese property developers and real-estate firms reported that the average price of housing in one hundred of China’s biggest cities rose in June. This is welcome relief: the previous nine months witnessed a fall in prices.

Other reports also suggest the Chinese real estate market is rebounding. There may have been a surge of investment in May. Property sales also declined less in May than in April.

According to a study by GK Dragonomics, real estate and property construction account for about 11% of China’s gross domestic product. That number is doubled when housing-related sectors such as appliances and funiture are considered. About one in five jobs is associated with the Chinese real estate market, more than in the United States at the peak of the real estate boom.

Obviously the Chinese real estate market is far too important to ignore. With over $3 trillion in foreign currency reserves, Beijing has more than enough to provide an effective stimulus package.

Emerging market countries need the Chinese real estate market to be robust. The People’s Republic is the world’s largest consumer of steel, iron ore, copper and other housing-related commodities. Construction equipment makers like Caterpillar (CAT, quote) rely on China for a significant part of sales.

The main exchange traded for the People’s Republic, iShares FSTE (FXI, quote) has rebounded in recent market action. So has Xinyuan Real Estate, (XIN, quote) a Chinese home builder. This is welcome news for the whole world.

One Response to Signs of recovery for Chinese real estate

  1. “With over $3 trillion in forex reserves Beijing has more than enough to provide an effective stimulus package”
    Thanks for revealing you know very little about economics with respect to China. These reserves were accumulated through their desire to peg their currency and have a liability of all the Yuan they created in buying it against it. So what are they going to do? Sell treasuries, buy yuan and spend on stimulus? What will happen? The yuan SOARS – exactly what they are trying to stop! Its reserves are useless…

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