Tuesday, December 13, 2011

Is China's Housing market unravelling?

First this from Bloomberg:

China Stocks Drop to 2-Year Low on Housing Slump, European Debt

By Bloomberg News - Dec 13, 2011 1:46 AM CT

China’s stocks fell to their lowest level in more than two years, after Chinese housing sales slumped and ratings companies said last week’s European summit did little to resolve the region’s debt crisis.

Anhui Conch Cement Co. (600585), whose materials are used in property construction, slid 4.5 percent after Fitch Ratings said China faces slower growth in home sales and construction next year. Poly Real Estate Group Co. led declines for developers after the nation’s biggest real-estate website reported housing transactions plunged more than 50 percent in 13 cities out of 35. Jiangxi Copper Co. (600362) retreated the most this month on concern faltering growth in Europe will cut demand for raw materials.

The Shanghai Composite Index (SHCOMP) slumped 42.96 points, or 1.9 percent, to 2,248.59 at the close, the lowest since March 2009 and capping a four-day, 3.6 percent loss. The CSI 300 Index (SHSZ300) fell 2.3 percent to 2,421.93. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, retreated 2.4 percent in New York yesterday.

The Shanghai Composite has slipped 3.6 percent this month as concern about a slowdown in economic growth outweighed the first cut in lenders’ reserve requirement ratios in three years by the central bank on Nov. 30. The index has tumbled 20 percent in 2011, exceeding last year’s 14 percent decline, after the central bank raised interest rates to combat inflation and curb property-price gains.

Anhui Conch, China’s biggest cement maker, lost 4.5 percent to 15.76 yuan. Huaxin Cement Co., the Chinese affiliate of Holcim Ltd., tumbled 5.1 percent to 12.95 yuan. Gansu Qilianshan Cement Group Co. (600720) slid 4.8 percent to 9.47 yuan.

Lending to developers will remain tightly controlled as the government prolongs a campaign to stabilize property prices and some smaller builders are “more vulnerable,” Fitch said in a report today.
Tax Cuts

Poly Real Estate, China’s second-largest developer by market value, fell 1.9 percent to 9.58 yuan. China Vanke Co. (000002), the biggest, lost 1.8 percent to 7.17 yuan.

Chinese housing transactions declined in 27 out of 35 cities tracked by Soufun Holdings Ltd. during the week of Dec. 5-11, according to the operator of the nation’s biggest real- estate website. Transactions fell more than 60 percent in at least 4 cities, including Tianjin and Hangzhou, it said.

China may use tax cuts to shore up expansion in the second- largest economy next year as export growth weakens and the threat of bad loans from stimulus spending narrows the government’s options. The nation’s top officials are mapping out policies for 2012 at the annual Central Economic Work Conference in Beijing. The event started yesterday, according to the state- run Xinhua News Agency.
Economic Growth Outlook

“China is no longer able to rely on massive investment in infrastructure building to stimulate the economy,” said Yao Wei, a Hong Kong-based economist with Societe Generale SA. “Tax cuts are unavoidable.”

The nation’s economic growth may “hit its bottom” in the first and second quarters next year, China Securities Journal reported, citing Ba Shusong, a researcher at the State Council’s Development Research Center. There may be moderate rebound in the third and fourth quarter and growth may be more than 8 percent next year, it said.

If China does falter it may well take some of the steam out of our hotter market segments. Richmond has already started waning and the Westside is losing some of it's frenzied HAM bidders, but West Van is still attracting big number buys.

Though I see some homes have dropped 500k or $1m from original asking. Sooo.... how does the Realtor come up with the selling price , when such huge price drops occur soon after listing. It is crazy really. No other item has such bizarre pricing metrics. When a buyer comes and views a house, they probably think there was formula that the seller or agent used to come up with the price.

Instead it may just be the number the agent used to get the listing or the wishful fantasy of the seller!