To help you understand what's going on in China's property market, how that impacts the Chinese economy and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…
The property market will remain a major drag on Chinese growth.
Home sales are weak, price growth has cooled and new housing starts are at their lowest levels since 2005. Excess leverage and overbuilding by developers have led to debt issues for several real estate companies, and to empty dwellings in many Chinese cities. This is in stark contrast with previous downturns when real estate was used to boost economic growth.
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The recent liquidation of property developer China Evergrande, with more than $300 billion in liabilities, highlights the magnitude of the problem. Beijing’s policies have so far failed to fix the issues in the property sector, including relaxing down payment requirements and pushing mortgage rates lower. Chinese banks are also directing more money to developers to help shore up their finances.
We expect a recovery later this year. With sales now 50% below their peak, affordability is improving as home prices fall. But wealthy Chinese families invest less in property than in years past, so any turnaround is likely to be modest.
This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.
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