Chinese Housing Market Shakes Off a Slump
HONG KONG — China’s slowdown — which has cast a shadow over the global economy and worried investors around the world — stems in part from a deep slump its its crucial property market.
Now that slump appears to be easing, as construction cranes return in some cities and real estate offices in some of the best neighborhoods fill up again with buying customers.
Prices for new homes in the country’s biggest cities are rising sharply, led by the southern boomtown of Shenzhen, where prices jumped a staggering 62 percent in March, compared with the same period a year earlier, according to official data released on Monday.
The real estate resurgence comes as growth across the rest of the economy is slowing, providing a welcome and significant boost. Some economists estimate property accounts for as much as a quarter of China’s gross domestic product.
But the figures also provide more evidence that China is increasingly a two-track economy, something Premier Li Keqiang himself has nodded to, as the gap between winning and losing industries and regions has become increasingly pronounced.
That raises the risk that the rebound is too narrow to be sustainable — it is concentrated in China’s biggest and richest cities — and that it will not outgrow the huge oversupply of unsold homes that haunts China’s smaller and farther-flung metropolises.
The dramatic price increases make it difficult for policy makers to justify further economic stimulus.
“People living in major cities increasingly find property prices unaffordable,” said Raymond Yeung, China economist at the Australia and New Zealand Banking Group.
“在大城市生活的人发现房价越来越负担不起，”在澳新银行(Australia and New Zealand Banking Group)研究中国经济的专家杨宇霆(Raymond Yeung)说。
“Although the pickup of the property sector helps stabilize economic growth, it will also restrain the central bank’s appetite for further monetary policy easing,” Mr. Yeung added.
Analysts noted that the current uptick in prices has been the role played by illegal financing, in which sales agents or other third parties provide loans to cover down payments. That practice recently prompted a crackdown by the authorities.
According to data released Saturday, real estate is now the fastest-growing component of China’s economy, with the sector’s contribution to gross domestic product rising 9.1 percent from the level of a year earlier in the first three months of the year. Financial services, by contrast, grew 8.1 percent — only half as fast as during the peak of the stock market boom last year.
The rebound has meant brisk business for people like Wu Chao, a manager at a branch office of Maitian, a popular Beijing real estate agency.
In an interview on Monday at his sales office Shuangjing, an affluent area in central Beijing with a nice view of the main business district and a short walk to an international school, Mr. Wu explained some of the main reasons for the property price rally.
Nearly all of the factors cited by Mr. Wu involved changes in or market reactions to government policy. Those included restrictions on home purchases in Beijing by nonresidents; the annual meeting last month of the national legislature; the official end of the one-child policy; and recent central bank actions.
Most wealthy Chinese prefer not to borrow for home purchases, settling the deals in cash instead. But Mr. Wu said a round of interest rate cuts had made mortgages increasingly attractive.
“Even very rich people sometimes would not pay the full amount,” he said of this trend. “They will take advantage of loans to buy homes.”
Still, some economists doubt the recent rally can be sustained for much longer.
Zhao Yang, the chief China economist at Nomura in Hong Kong, pointed to the huge supply of homes either still under construction or completed but unsold. He calculates that floor space under construction is enough to supply more than six years’ worth of sales.
“The sector still faces long-term destocking pressures,” Mr. Zhao wrote Monday in an email.
A turnaround in the government’s policy stance is also a factor, as it seeks to limit the risk that the market could deflate in a messy fashion.
“During this round of price surge, there are signs of bubble factors,” Mr. Zhao wrote. “The government has started to roll out policies to rein in the increase of housing prices.”