China to suppress housing, steel smacked

It seems China news is also hitting the ASX today. From Bloomie:

China told local authorities to “decisively” curb real estate speculation and take steps to rein in the property market, stopping short of imposing fresh measures after prices rose the most in two years last month. Cities that have had “excessively fast” price gains should “promptly” impose home-purchase restrictions if they’ve not done so already, according to a statement yesterday after a State Council meeting headed by Premier Wen Jiabao. Provincial capitals and municipalities reporting directly to the central government should publish annual price control targets to keep new-home costs “basically stable,” according to the statement.

Investors had been concerned the government, preparing for a change of leadership next month, would impose new curbs on the property market, sending shares of Chinese developers listed in Shanghai to the biggest drop in more than six months on Feb. 19. Home prices rose 1 percent last month from December, the most since January 2011, according to data from SouFun Holdings Ltd., the nation’s biggest property website.

The announcement “pretty much reiterated existing measures instead of declaring new ones,” said Lu Ting, chief Greater China economist at Bank of America Corp. in Hong Kong. “Investors can breathe a sigh of relief. Still, the memo signals that leaders are seriously concerned about rapidly rising home prices, they will step up enforcement of existingmeasures, and it’s likely for them to introduce new measures
contingent on future pace of home-price increase.”

…China needs to maintain the “consistency and stability” in its property curbs because home supplies will remain tight in large cities as the nation’s urbanization accelerates, the government said in yesterday’s statement. Cities that already have home-purchase limits will need to improve such measures “according to uniform requirements,” the government said, without elaborating. The government also will expand property tax trials, it said, without giving more details.

No surprises here at all. As I’ve said, this is not a new virtuous cycle of Chinese private sector growth. It’s an infrastructure supported structural adjustment to new growth drivers. Rebar futures are getting smashed across the curve:

This will weigh heavily on the iron ore rally.

Houses and Holes
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  1. This is a bit of a wait and see. There is little in the announcement that has not been expected.

    “To keep property prices in check, the government has taken an array of measures, ranging from raising the minimum down payment and higher interest rates for second-home mortgages to putting a conditional ban on the buying of properties by non-local residents.

    A property tax was also launched in Shanghai and Chongqing on a trial basis. “We will stick to the policy to restrain speculative home purchasing”, while supporting those who buy property for their own use, Wen said in a statement issued after the meeting.”

    Simultaneously Wen “pledged Wednesday to “fully implement” an affordable housing plan, which aims to complete the construction of 4.7 million units of affordable houses, and start construction of another 6.3 million in 2013.” The affordable housing programme has committed to the construction of some 30,000,000 units.

    • It is not directly about ‘adjustment’ which I assume you to mean ‘rebalancing’. It is a measure to curb rampant speculation.

        • Not at all. If it’s my attention to rebalancing you want I linked to this in the Daily Links today:

          “New data suggest that it is time to revise the view that China’s growth is driven largely by exports and investment. Private and government consumption together accounted for more than half of China’s output growth in 2011-12, signaling a big shift in the composition of domestic demand. Physical capital investment, the main driver of growth over the previous decade, is no longer the dominant contributor to growth. As for exports, a shrinking trade balance has in fact dragged down growth these past two years.”

          It just happens that the curb is a measure to dampen speculation: part of the quest to maintain equity and social cohesion together with attempting to avoid undue lending risks/bubbles.

          • Yes, agree with DLS, this is part of rebalancing, an attempt to take some of the uglier aspects and risks out of it.

          • part of the quest to maintain equity and social cohesion together with attempting to avoid undue lending risks/bubbles.

            Love your work mate. That’s some beautiful PR double-speak.

            Now tell me again how you love government intervention in markets (as long as it happens in China)

          • Construction activities absorb large amounts of steel and steel related product, nothing better really.

            However, several hundred million consumers with growing purchasing power will seek whitegoods, cars, trucks, train travel, aircraft travel etc and in turn, housing all of which utilise steel product.

            Globally various levels of growth will continue again utilising all of the above – China has positioned itself as a major international steel supplier.

            The outlook is bearable 😉

  2. It’s about time someone gets serious about bubbles/speculation while the rest of the world is trying to create the very problems that got us here in the first place. Go China – we might see some leadership yet.