REPEAT: MNI Analysis: China Property Sector Could Drag on GDP

Repeats Story Initially Transmitted at 09:29 GMT Sep 19/05:29 EST Sep 19

     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

slightly."

     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: iris.ouyang@marketnews.com

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