Courtesy of Also Sprach Analyst.
I have noted before that towards the end of May the Chinese government gave up on rebalancing the economy and started reflating the real estate market. Although the central government as well as the central bank have repeatedly denied that they have given up, the reality is that they have, especially at the local government level.
So transaction volumes in the real estate market have picked up, particularly in the past few weeks, while prices have apparently stopped falling according to Soufun.
The chart from Deutsche Bank below shows the weekly transaction volumes for 39 of major cities have picked up very markedly in the past few weeks as local governments “fine-tune” real estate market curbs, and people started buying properties on the back of lower prices.
Despite this seemingly positive development, I remain fundamentally very pessimistic about the Chinese real estate sector owing to massive over-building. If the massive supply in the pipeline is completed in the coming years, the excess housing units will become a big problem for the market. I suspect that the current measures to reflate the real estate market will at most buy a little breathing space for cash strapped real estate developers as they struggle to service their debts.
