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Rediff.com  » Business » China H1 property investment growth slows for 2nd month

China H1 property investment growth slows for 2nd month

July 15, 2016 08:30 IST

A view of the city skyline from the Zhongfu Building at night in Beijing.Investment growth in China's real estate in the first half of 2016 contracted for the second month, raising expectations that more stimulus would be rolled out in the remaining of this year to help grow sales -- especially in smaller cities where the housing inventory level is high.

Property investment in January-June rose 6.1 per cent from a year earlier, reported by the National Bureau of Statistics on Friday, slowing from an increase of 7 per cent in January-May, while property sales by floor area grew 27.9 per cent, down from 33.2 per cent.

In June alone, property investment was up only 3.5 per cent from a year ago, according to Reuters calculations, compared with 6.6 per cent in May.

Analysts expect China's economy to lose further momentum in the second half after posting gross domestic product at 6.7 per cent in the second quarter, prompting the government and central bank to roll out more support measures even as they worry about fallout from Britain's exit from the European Union.

"A slowdown in the property sector in H2 is bound to happen after a fast pickup in H1, and the market expectation now is Chinese government will ease credits to boost the sector," said David Hong, head of research at Real Estate Information Corporation.

"But if the loosening measures do not beat expectations, in the end there could be a bigger downside surprise hurting (investment) confidence in the property sector."

Real estate investment directly affects about 40 other business sectors in China and is considered to be a crucial driver for the economy.

Machinery maker Zoomlion Heavy Industry Science and Technology Co Ltd issued a profit warning in the first half this week, citing a lack of significant improvement in demand for construction machinery despite a yearly increase in property investment.

A flurry of government stimulus measures introduced since late 2014 have turned the sector around from a downturn mid last year.

But rapid price gains in some of the biggest cities fanned fears of a bubble and prompted some local governments to tighten home and land purchase requirements, cooling sales in the past few months.

On the other hand, a housing glut continued to take its toll in the smaller cities.

New construction starts in June were up 4.9 per cent from a year ago, measured by floor area, Reuters calculations showed, slowing from 10.6 per cent in May.

Growth in inventory floor area last month was 8.6 per cent higher than a year earlier, compared to 9.9 per cent in the previous month.

The Chinese Academy of Social Sciences last week also warned of a short-term correction in the property sector in the second half to the first half of next year, citing a slowdown in growth in both home prices and property investment.

IMAGE: A view of the city skyline from the Zhongfu Building at night in Beijing. Photograph: Jason Lee/Reuters

Clare Jim in Hong Kong
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