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.”