Is Chinese property back in favour?
While the economics of China are often shrouded in mystery and intrigue there was some good news overnight with news that the Chinese property sector is attracting interest from investors. This led to a rise in the Chinese stock market, although the rise prompted profit-taking ahead of important US data later this week, but it now seems as though the Chinese economy may not be as weak as some had expected.
Over the last four of five years it has been China and India which have been feeding the resources frenzy which has led to a significant rise in Australian economic activity. There were signs that China and India were beginning to slow-down in economic terms but it seems as though this may not be the case.
Chinese property prices
While the Chinese economy and the Chinese investment market are like no other on the international stage, with undue control exerted by the government, it was interesting to see that China’s politburo confirmed house price increases were sticking. There had been concerns that demand for property investment was beginning to wane and this would weigh heavily upon the economy in the short to medium term.
Quote from PropertyForum.com : “Price growth in the residential property market in Hong Kong has slowed as measures designed to cool the market take hold. Data from the Land Registry shows that residential transaction volume slumped 28.1% month on month, with only 4,534 sales recorded in March.”
The Chinese authorities have now promised to increase support for the economy and the real estate sector which is something that was particularly unexpected by investors. There was a feeling that the Chinese authorities would let the economy drift back and consolidate at lower levels and this would obviously have had an impact upon property prices and demand. Interestingly the authorities also focused upon “human centred” urbanisation which in simple terms means development of inner-city areas where perhaps properties have fallen into bad repair.
Future property development
The fact that the Chinese politburo has expressed an interest in expanding the real estate market in China was obviously well-received by investors in Chinese property developers. There had been concerns that both national and regional authorities would attempt to cap any rise in property prices and indeed there were widespread concerns about the health of the Chinese economy.
It will be interesting to see whether international investors now look towards the Chinese property sector, both directly and indirectly, as some kind of “safe haven” in these difficult economic times. While London is one of your more traditional property safe havens there are other areas of the world which are now starting to attract significant investment by some of the best-known names in property development.
The Chinese economy
The authorities recently commented that the Chinese economy would be “steady” in the second half of 2013 which prompted the vast majority of economic forecasters to stick with growth expectations in excess of 7%. While this is a significant reduction from growth seen over the last few years, when you put it into perspective, and compared to less than 1% growth in Europe, we are perhaps worrying about nothing?
The Chinese economy will depend to a greater extent upon domestic demand and US trade in the short to medium term and hopefully by the time these two elements begin to wane the European debacle will be over and the worldwide trading arena will be back on a more even keel. In the meantime, demand for property in China is stronger than many had expected and new price rise introductions look as though they will stick – something which has surprised many people.