REPEAT:Analysts: China's Slowing Property Sector Could Hit GDP

Repeats Story Initially Transmitted at 10:42 GMT Oct 12/06:42 EST Oct 12

     BEIJING (MNI) - China's weak property sales performance during the

traditionally robust "Golden September and Silver October" months is expected to

continue for the rest of the year, but analysts are divided on whether the

sluggish property market will exert a negative influence on China's

fourth-quarter economic growth.

     According to the Shanghai-based E-house Real Estate Research Institute,

sales by area of 50 major Chinese cities the institute monitors declined 31%

year-over-year in September, the seventh straight monthly drop. On a

month-on-month basis sales grew 3%, ending five consecutive months of drops.

     Lai Qin, researcher at E-house, told MNI that the weak property sales in

September and October would not have an obvious impact on GDP growth in the

third and fourth quarters because the influence of property sales isn't usually

seen until six months later.

     But, he added, this year's GDP growth will still be dragged down because of

declining property sales throughout the entire year. 

     "Considering both direct and indirect effects, around one-third of China's

economy is related to the property sector," Lai said. "I predict national

property sales this year could drop by around 20%, and based on this

calculation, that could drag down GDP growth by around 1%, he said. 

     For the first three quarters, sales by property area were down 17% in the

50 cities, with most hotspot cities' property markets showing a cooling trend,

E-house said in a report.

     "The month-on-month growth shows the performance in September was slightly

improved, but based on year-over-year data the property market's performance

compared with last year was sluggish," Lai noted in the report.

     Lu Zhengwei, chief economist at China Industrial Bank, said in an interview

with MNI that the property market's recent performance "is in general not

surprising to the market." 

     Lu said the support the property sector had enjoyed from the government's

"shanty-town renovation" program weakened in September after this year's goals

for the program were mostly completed by the end of August. He also said growth

of the sector would continue to edge down for the rest of the year not only due

to the drawing down of the shanty-town program, but also because of tighter

housing policies expected to implemented by the government later in the year.

     He told MNI that positive growth in property investment in the months ahead

would also contribute to China's GDP growth, although the contribution may be on

a smaller scale than in recent years.

     Lu predicted China's GDP growth in the third quarter would be 6.8%, and in

the fourth quarter would be from 6.5% to 6.6%. He said the property market would

continue to boost other sectors, such as steel, furniture and imports, as well

as support employment and thus further impact consumption.  

     Lu also noted he disagrees with Lai's argument that slow September and

October sales would not impact Q3 and Q4 GDP, saying that property sales

increasingly have an immediate impact on property investment and on the overall

economy -- and not six months down the road -- because property developers make

investment decisions faster once they notice sales trends.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com