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China: Recent housing strength looking more entrenched – Westpac

Elliot Clarke, Research Analyst at Westpac, notes that momentum in China’s housing market has continued to build in recent months.

Key Quotes

“At June, 84% of the 70 cities surveyed were reporting monthly price gains – the strongest outcome since August 2016. At 90%, gains for the established market were broader still – a high back to April 2013.”

“For new housing, prices in tier 2 are currently up 6.6%yr, while in tier 3 they have risen 6.0%yr. Tier 1 house prices are, in contrast, broadly in line with their year ago levels after annual growth troughed at -1.0% in April.”

“For existing housing, very similar outcomes have been seen: prices in tier 1 are unchanged; and in tier 2 and tier 3, they are up 6.3%yr and 3.8%yr respectively.”

“Taking a look at the monthly growth pulse for new housing, it is evident that momentum is picking up. Average growth has lifted from -0.1% in January to 0.3% in June; while the maximum gain has jumped from 1.2% to 3.3%.”  

“Growth in housing starts has accelerated ahead of sales, so it is right to expect construction momentum to hold up in the second half of 2018.”

“That being said, if the pace of sales does not follow, then construction activity growth will again fall back as inventory is worked through.”

 

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