China real estate sales show

The first half of 2008 saw a slowdown in the growth rate of loans to real estate developers and buyers.

The People’s Bank of China (PBOC) reports Chinese bankers held loans totaling RMB5.2 trillion (about $580 billion) to real estate developers and housing buyers by the end of June, up 22.5% year-on-year.

The central bank said the growth rate was two percentage points lower than the same period last year, representing a decline for seven consecutive months since last December.

China’s real estate investment grew fast in the first half, but the housing price decline in some cities has strengthened a wait-and-see attitude among housing buyers, which has held back housing sales.  The country’s real estate developers sold out about 260 million square meters of houses in the first six months, and the sales value totaled RMB1 trillion, representing a decrease of 7.2% and 3.0% over the same period last year, respectively.

The PBOC had been warning banks to control their exposure to real estate.  Obviously the banks are responding.
Source: China Stakes.com

The headline comes from the International Herald Tribune which is not normally given to gloomy stories.

It reports that although official figures show investment in property rose 32% in the first four months from a year earlier, developers are worried as bank loans dry up and the cost of tapping other sources of funds rises.

Falling home sales are a particular threat to developers, who typically rely heavily on cash from the sale of unfinished projects to pay for operations and expand.

According to the China Index Academy, which is affiliated with SouFun.com, a leading real estate Web site, the number of residential transactions in Beijing fell 13.7% in April from March and was down 56.4% from a year earlier.

Not a happy scene.

Zhang Xinming, chairman of Walter Asia, a developer based in Jiangxi Province, said maximizing cash flow was now his main strategy.

Walter Asia has accelerated the development of land that it had bought cheaply, hoping to cash in quickly.

It is also shifting its focus from high-end housing preferred by investors to more affordable apartments that are still in demand by regular home buyers. Which is what the government wanted to happen.

Zhang Xinming said, ‘The ability of Chinese developers to get through the harsh winter is growing.’
Source: International Herald Tribune

China’s banking regulator has just released a new circular, requiring banks to strengthen their management on commercial real estate credit. This comes with a rise in the number of house buyers who can’t afford their mortgages.

All of this, in a sense, in response to the American sub-prime disaster where greedy bankers loaned money to people who would, in other countries, not even get a credit card.

The China Banking Regulatory Commission sent an inspection team to Shanghai a month ago.

The team discovered some real estate companies had forged documents to help non-credit worthy customers get mortgage loans.

This is going to get those real estate companies into serious trouble unless they have amazing luck and connections.

The CBRC is calling on all banks to step up risk control, and carefully revalue the credit of both the real estate developers and home buyers to avoid further defaults. All of which means it will be harder to borrow money to buy a property and, as a result, property prices may stall or even, wonder of wonders, decline.
Source: CCTV.com

Forbes magazine represents right-wing business thinking in the United States. Not the nutty right. But well to the right of center. Bear that in mind when you read that it considers that China’s inflation policy spells trouble.

It points out that China’s consumer price inflation came in at 8.5% for April, reflecting strong and continuing pressure on prices. It says the main driver continues to be food, although prices of other goods are also showing upward pressure.

April food prices are up by 22.1% from a year earlier.

It goes on that non-food inflation remains relatively low at 1.8% and points out, logically, it is only a matter of time before wages increase in response to the high level of food-price inflation and companies begin to pass on increased costs to consumers.

This high inflation compels the monetary authorities to continue monetary tightening.

That is Forbes making two presumptions. The first that this high inflation rate will go on for ever. And the second that the government will act in any way which fits in with the Forbes capitalist — it boasts that on its front cover — view of life.

Once it has gotten to that conclusion it can logically point out this will create difficulties for stock market and real estate investors who are used to easy credit.

And it then comes to the conclusion that persistent inflation and resulting restrictive monetary policy may also spell trouble for the financial sector.

It finishes with a final flourish which suggests that China will have its own sub-prime crisis. ‘There is some risk that this could greatly impact property prices, and that banks will see a higher proportion of non-performing loans.’

Perhaps. Possibly. Maybe.

Especially if you have a capitalist view of the world.
Source: Forbes

China saw commercial residential sales dip in the first four months this year while real estate investment in central and western regions outpaced that in the eastern part.

The National Development and Reform Commission (NDRC) said the area of residential buildings sold in the January-April period fell 4% year on year to 136.6 million square meters, compared with a 16.6% growth in the same period last year.

According to an NDRC report published in April residential buyers appear to have taken a wait-and-see attitude in the first quarter as housing price rises generally slowed down and transactions continued shrinking as a result of macro-control policies.

The NDRC, China’s top economic planner, said the country completed the construction of 84.5 million square meters of commercial residential houses in the first four months, 20.2% up year on year.

Real estate investment soared 44.8% in central China and 42.6% in western China, while the booming eastern areas posted a 26.1% growth.

In the period, the nation completed RMB695.2 billion ($99.3 billion) of real estate investment in total, 32.1% up year on year and 4.7 percentage points higher.
Source: China View