Chinese households turn off property

CLSA conducts monthly Chinese consumer research and this month’s results are interesting:

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Household sentiment on property prices slid in February and fewer respondents tell CRR they would buy a property as soon as possible given current prices. Their enthusiasm for property investing also slipped, unlike their demand for bank wealth management products which kept rising. On average, this middle-class panel’s total family income rose around 6% in 2013, similar to the previous year; they expect an average 8% growth this year.

Sentiment on property prices slides. Household sentiment on property prices dropped in February, with only 37% of CRR’s middle-class panel now expecting house prices to increase over the next six months, down from an average 42% over the previous six months (Fig 1). Also down is the share that would buy ASAP given current prices, 16% vs. 21% in January (Fig 2).

Their interest in property purely as an investment also slipped (Fig 3). WMP enthusiasm undented. Their appetite for WMPs kept rising in February (Fig 3). Soon after we spoke to them, Yu’Ebao’s 7-day annualized interest rate dipped below 6% for the first time since Dec-13 as did Li Cai Tong’s (Fig 4). Their interest in stocks was flat and slightly more existing investors plan to hold their position on a 6M view (Fig 5).

Families expect 8% income growth in 2014. Overall, the panel expect average family income growth of 8% in 2014, higher than the 6% they got in 2013 (Fig 8). Among wage earners, more than 70% of them got a bonus for 2013 averaging two months’ salary, similar to previous years (Fig 12, 13). Slightly more respondents than in January expect their family income to be stable on a 6M view and slightly more also see their spending power being stable amid softer inflation expectations post-CNY: 62% vs. 70% expect overall prices to rise and 58% vs. 65% expect food prices to rise in the next 6M (Figs 15-19). CRR’s latest Food Price Index (2W Mar) edged down by 0.5% WoW, 4.4% MoM and 0.9% YoY (Fig 20).

More leave, more travel. As highlighted in CLSA and CRR’s recent study (Chinese Tourists: Exploring New Frontiers), tighter enforcement of annual leave will benefit tourism. Two-thirds of the panel’s wage earners get paid vacation but only 70% use it fully. Over 80% of those who don’t use all their leave would travel more if they could take more days off (Figs 23-26).

Whatever the mix of tightening is over there it’s turning sentiment away from property.

3 Responses to “ “Chinese households turn off property”

  1. StatSailor says:

    Hilarious!

  2. Explorer says:

    And if they believe Warren Buffet they might turn of US equities too:
    http://advisorperspectives.com/dshort/updates/Market-Cap-to-GDP.php

    And other valuation methods also suggest an overvalued US market:
    http://advisorperspectives.com/dshort/updates/Market-Valuation-Overview.php

    Margin debt is also at very high levels:
    http://www.advisorperspectives.com/dshort/updates/NYSE-Margin-Debt-and-the-SPX.php

    If we have a scare, including QE taper or interest rate rises, there could be a lot of fragility in US markets.

    Hey Eds,
    any chance on some similar analysis of the ASX?

    • aj. says:

      Those margin debt numbers are exciting – we have a 100 trillion in funny money pouring into the system out there and no-one even standing near the spigots. So what seems like a lot is not much by todays standards.

      I’ve put my bets on on the back of this being early days, like last time we can probably ring the bell for the top when we see the rise of the urban home backed margin lending financial planners to the rich list.