There’s no stopping it. First up, September sales were a write-off:
China’s new home sales during the week-long National Day holiday declined significantly from a year earlier, led by sharp drops in lower-tier cities, as the housing market in the world’s second largest economy continues to cool down.
New home sales measured by floor space in 15 sample cities dropped by 33 per cent during the period of October 1 – 7 compared to a year earlier, as most potential home buyers are holding a wait-and-see attitude, according to the China Index Academy, one of the country’s largest independent real estate research firms.
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The 15 cities include four tier-one cities, seven tier-two cities including Wuhan, Fuzhou and Jinan as well as four tier-three/four cities including Dongguan, Taian, Putian and Wenzhou.
In the four tier-one cities including Beijing, Shanghai, Guangzhou and Shenzhen, new home sales reached about 421,900 square meters during the seven-day period, largely in with with the level seen in the same period last year, showed the data.
Notably, in Shenzhen, new home sales jumped by 175 per cent year over year to about 109,900 square meters, mainly due to a surge in new home supply, said the academy.
“The data in Shenzhen included many home purchases already signed before the holiday, so it should only be taken as a reference and not an accurate reflection of real transaction situation,” said Li Maozhe, head of the Beike Research Institute’s Guangzhou Centre.
In contrast, new home sales in Shanghai and Guangzhou fell by 42 per cent and 8 per cent year over year, respectively, while new home sales in Beijing were about 157,400 square meters, largely in line with a year ago, according to the China Index Academy.
In the seven tier-two cities, new home sales totaled 353,200 square meters in the period, slumping by 43 per cent from a year ago, while new home sales in the four tier-three/four cities reached 136,800 square meters, plunging 44 per cent from the year-ago period.
Separate data from Zhuge Zhaofang Data Research Centre showed that, among the 15 cities it tracked, 11 cities saw new home sales decline year on year during the holiday.
The weak performance followed sluggish figures in September. Data from the China Index Academy showed that new home sales in major cities fell by 6.9 per cent in September from the prior month, slumping 35.6 per cent from a year earlier.
Third and fourth-tier cities are three-quarters of floor space volumes. That’s where Evergrande was most pervasive and where most of the empties are, so that’s where we’d expect the bust. September was calamitous. So far October is apocalyptic:
Land transaction volumes are disastrous:
Because developer funding is frozen solid:
Unless policymakers get much more aggressive, all we can expect ahead is more developers slumping into crisis and dumping stock to fund themselves resulting in falling new property prices which will make it all worse:
The nation’s developers are facing a “triple whammy” with dwindling access to offshore financing, “catastrophic” September pre-sales and a limited onshore banking market, distressed debt veteran Michel Lowy said in a Bloomberg Television interview Friday.
That could spark a “large wave of defaults” if the offshore market remains shut for riskier borrowers going into next year, said Lowy, chief executive officer of his alternative asset manager SC Lowy.
Too right. Property developer average debt/EV ratios in DMs is 20% and EM ex-China is 24%. Check out the below in column three for Chinese developers:
Anything above 30% is trouble. Above 50% close to suicidal. Chinese leverage is pure ponzi.
Sunac looks like the next titan to the knackery. Having declared the property market “frozen” and then undeclaring it a few days later:
So, Chinese property is crash landing in real-time. Whether it drags the rest of the economy down with it in part hangs upon a planned pick-up in infrastructure investment as an offset. But it is still down by roughly one-third as well because local government budgets are so tied to land sales:
This data is far worse than anybody’s current bear cases, even mine. Unless something is done, China is plunging towards a 30% collapse in total construction volumes over the next six months which will nosedive the wider economy into a hard landing all by itself.
Add an energy shock and markets should be in a screaming panic.