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MNI Analysis: China Property Sector Slowdown Could Drag on GDP

     BEIJING (MNI) - The downward trend of the property sector could weaken the
usual strong support the sector provides to China's GDP growth, E-House, a
Shanghai-based property consultancy, said Tuesday.
     Wang Mengwen, a researcher at E-House, said in an interview with MNI that
both property investment growth and sales growth -- two main contributors of the
property sector to GDP growth -- are expected to slow in the second half. 
     Property investment growth is expected to slow to as low as 6% for the
whole year based on the current year-to-date growth rate of 7.9% through August,
according to Wang. 
     Property sales growth in terms of area sold is expected to continue to be
in positive territory, based on the 12.7% rise in the first eight months, but
"it would not have too much contribution to GDP growth," Wang told MNI.
     But Wang pointed out that China's property market had maintained stable
growth in the first eight months even though sales, investment and housing
starts saw small-scale fluctuations.
     Property developers were active in land acquisitions in the January to
August period, acquiring 142.29 million square meters of land, or 10.1% y/y
growth, one percentage point down from the first seven months. Land transaction
value rose 42.7% on a yearly basis to CNY660.9 billion, 1.7% higher than January
to July, Wang said in a separate report.
     The continuing fervor in the land sales market contrasts with slowing
property sales in most Chinese cities. In the first eight months, 985.39 million
square meters of property units were sold, a 12.7% jump compared with the same
period a year ago, but 1.3 percentage points lower than the January-July period.
     "There's a high chance that sales in the fourth quarter will continue to
drop," Wang said.
     Property investment continued to grow, according to the report, increasing
7.9% y/y to CNY6.9494 trillion, flat with that the January-July period.
Investment in residential property units increased 10.1% y/y to CNY4.7440
trillion, 0.1 percentage point higher than the first seven months.
     "Property investment y/y growth in January to August basically extended the
steadily decreasing trend since the beginning of the year," Wang said in the
report. "As land prices and housing starts are expected to drop, the
year-on-year growth of property investment would also be trending stable."
     Based on E-house calculations, housing starts rose 7.6% to around 1.15
billion square meters in the January-August period, 0.4 percentage point lower
than the first seven months.
     Property sales increased 12.7% to 985.39 million square meters year-to-date
in August, 1.3 percentage points lower than the first seven months.
     "Given that monetary policy is increasingly tightening, the rapid release
of demand has also lasted for a very long time, plus recently and in the near
future policy controls on the property sector may expand to more cities," Wang
said. "The growth of the area of property sales in the fourth quarter would drop
     She told MNI that the government's "shanty-town" renovations in Tier-3 and
Tier-4 cities are supporting property sales in those cities. Property companies
may also start to accept the price levels under the guidance of the government
for their new property projects amid greater financing pressures. Since the
Chinese government limits the pre-sale listing prices for new property units,
some property developers have postponed selling their property units, waiting
for a possible policy loosening.
     Wang also said a statistical rebound in terms of sales could occur in some
cities where housing control policies were implemented much earlier. The lower
base caused by an earlier implementation time could boost sales growth in the
second half of the year in such cities such as Shenzhen, Wang said.
--MNI Beijing Bureau; +86 (10) 8532-5998; email:
--MNI Beijing Bureau; +86 (10) 8532-5998; email:
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