China’s property slump bad news for resources boom: ANZ

Demand for Australian commodities could take a hit if cooling Chinese property market continues to slump. 

According to ANZ’s China economists Li-Gang Liu and Zhou Hao, Chinese authorities have “been actively cooling an overheating property market for the last two years”, with both Chongqing and Shanghai “experimented with a property tax”. 

In addition, more than 20 first- and second-tier cities (the major capital cities and secondary provincial capitals) have imposed a “non-resident purchase restriction policy”, while an ambitious public housing program that aims to build 10 million affordable houses in 2011-2012 and 36.5 million by 2016 is expected to substantially reduce demand in the private housing market in the foreseeable future. 

“These policies have hit the property sector hard: transaction volumes have declined significantly, first in the top-tier cities, and then the second- and third-tier cities. New property transaction volumes declined by more than 30% in the first ten months of 2011, compared with the same period in 2010,” the bank says. 

“In October, the economy witnessed the biggest price decline since the introduction of the 70 city indices in January 2011: new residential property prices in 33 cities have declined on a monthly basis, while prices in another 23 have remained flat,” Li-Gang Liu and Zhou Hao report.

They warn that because the property sector is a “central pillar for the Chinese economy” the impact of a slump on the economy would be compounded by the lack of alternative growth engine and the weak external demand for the foreseeable future. 

“There is a close link between property sales and fixed asset investment, with a weak property market leading to slower property investment. 

“A slump in the property sector will have significant repercussions for related industrial sectors… Key linkages include the upstream industries of steel, cement and building materials; downstream industries of automobile and home appliance; and the intermediate sectors of banking and advertising,” say Li-Gang Liu and Zhou Hao.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer


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