Courtesy of Also Sprach Analyst.
Yesterday I noted how the change in government policies in China’s realty market belied its rhetoric of rebalancing.
Even though the Chinese government has been telling everyone for some time that that they are serious in trying to curb home prices, it is now becoming clear that they are now giving up on real estate market curbs already. In fact, not only has the government been fine-tuning real estate policies at the local governments level, it has now cut lending rates, as we have all known. Between attempting to maintain high growth and letting the economy to adjust, the government speaks the latter and does the former.
As a result of all these subtle changes in language and actual policies, it seems that the real estate market is heating up again in various cities. Suddenly we are seeing queues in property sales offices again, in Beijing, in Shenzhen and in other places, as people believe that as the tightening is over. Real estate prices will rise again according to Sina.
Deutsche Bank’s China property research has become very excited, claiming that the real estate sector now has the “best industry fundamentals in three years”, so it is now time to BUY, BUY, BUY property stocks:
In the past three years, government tightening, weakening housing affordability, slowing sales, rising inventory, and tight financing for developers have been five key investor concerns on China property. However, since March 2012, four of these concerns have cleared as the fundamentals of the China property market continue to improve: 1) government policy direction shifted to “loosening”; 2) sales volume continues to recover after price cuts; 3) inventory situations have improved; and 4) housing affordability has strengthened. This should help drive more meaningful valuations re-rating for property stocks.
Of course, whether loosening policy will ultimately be successful in reflating the economy is another question. The Deutsche Bank report has absolutely no mention of Eurozone crisis or broader context.