Chinese house prices slip-slide away

This is potentially a very big story for 2021. Chinese house prices are slip-sliding away. In November they barely grew at just 0.1% and 4% year on year:

46 of 70 major cities are now either stalled or falling:

Top tiers are cooked. There is still some growth lower down:

The raw data:


Needless to say, this bodes poorly for steel and iron ore demand in 2021, especially the second half. Falling house prices and starts were a key component in the great bust of 2014/15.

There are a range of outcomes here. If prices keep bleeding and need to be stabilised then the PBOC will have to cut rates. That would come as quite a shock to global markets next year and would weigh heavily on the AUD. That would be made worse by sliding iron ore demand and prices.

Yesterday I produced this chart which may indicate that the flow through to construction is already here:

But here is the data from a different source:

Trending down but not disastrous.

I will try to solve this mystery in the coming days. At this stage, it is fair enough to be alert but not alarmed about iron ore.

David Llewellyn-Smith

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