This is a fascinating, in-depth account about how the loud revving of China’s real estate engine in recent years has probably been the last roar of a mad party. The economist Patrick Chovanec says Q1 real estate investment rose 23%, but RE sales fell 14% in April…and that was a 17% decline for residential properties, which make up 80% of the market. It’s a great analysis that makes sense of other stories that have been coming out of the country about ghost towns and empty shopping malls.
Meanwhile, the contraction in sales, new starts, and land sales deepened even further in April. Although the decline in sales appeared to moderate slightly for the sector as a whole (-4.5%) and for housing (-2.9%), this was again largely due to a lower base effect from last April, when sales contracted month-on-month by nearly RMB 100 billion. This year’s April sales also registered a significant month-on-month decline, by -17.2% for all property and -15.5% for housing. The more striking news, perhaps, is that commercial property sales, which have been much more resilient until now, also plunged, with office sales falling -23.4% year-on-year and -34.4% compared to March, and retail property sales falling -9.5% year-on-year and -22.7% month-on-month. April was the first month in which all three categories were in year-on-year decline.
New starts in April fell -14.6% year-on-year and -27.0% month-on-month, for property as a whole. Housing starts fell -14.4% year-on-year and -23.4% month-on-month. Office and retail starts, which had remained quite strong through Q1, also plunged. Office starts fell -21.0% year-on-year in April, and -45.1% compared to March. Retail property starts fell -18.7% year-on-year, and -36.8% compared to March.