Here are two charts that should make worry about Chinese property…a lot. The first is the stock of Chinese floor space under construction:
Total Chinese floor space under construction is peaking. Residential already has, office and commercial are next.
Second, here is the flow of Chinese floor space new starts:
There is always a lag between stock and flow as starts take time to complete meaning that big falls in total Chinese floor space construction are already locked in for this year and next.
That’s the good news. The bad news is that this boom was a one-off. A once per century modernisation build-out that is now on the down slope as urbansition slows materially leaving existing construction stock sufficient for many years. At some point in the near future Chinese floor space under construction is going to shrink all the way back to pre-GFC levels which makes you seriously wonder how on earth China is going to grow at anything above developed economy rates. In fact, how it avoids an outright crisis is still a moot question.
Those buying iron ore today on the assumption that it has bottomed are picking up pennies in front of collapsing 100-story building.
