China real estate investment frozen


Cross-posted from Investing in Chinese Stocks.

Real estate investment picked up slightly in May, rising to 2.5% yoy growth for the month. That’s up from 0.5% growth in April. The cumulative figure continues to fall towards the monthly growth rate, with YTD growth now only 5.1% in May versus 2014. Land sales are still down more than 30% yoy. Drilling further down, residential home investment saw no growth in the month of May versus 2014 and it is only up 2.9% YTD.

The one bright spot is sales, which are now up year on year. Price follows volume, so this is good news for developers, even if they don’t believe the good times will last. The Chinese media has often quoted developers saying they do not believe the current pick up will last more than three months. A NYTimes article out today reflects this sentiment.

Idle Builders Hold China’s Economy Back

“Real estate developers are speeding up destocking but not starting new projects,” said Haibin Zhu, the chief China economist at JPMorgan in Hong Kong.

“The implications are also twofold,” Mr. Zhu said. “The rebound in transactions and stabilized house prices suggest that financial risk related to the housing market is mitigated, but weak real estate investment suggests that the drag on economic growth continues.”

From the NBS, year on year investment:


Land purchased by developers:


New Home Sales By Area (yellow) and Yuan (blue):3_r75

Developer capital:


About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.