China’s property market has reached a “tipping point” and the slowdown in the housing industry will have a spillover effect on demand for steel and other construction materials, according to Nomura Holdings Inc.
The risk of the nation’s economic growth falling to less than 8 percent in the first quarter is also higher than before because of the housing market, Zhang Zhiwei (張志偉), a Hong Kong-based economist at Nomura, said on a conference call yesterday.
“The property sector has probably already reached a tipping point given the data is getting worse at a very fast pace,” Zhang said. “We’ve been here before in 2008 with housing investment and I feel we’re getting close to that stage. I’m more worried about the housing sector and the GDP of the first quarter.”
China’s home prices fell in 33 of 70 cities monitored by the government last month, the worst performance since it expanded property curbs and scrapped the reporting of national average housing data this year, according to figures from the statistics bureau on Friday.
Home sales volume in Shanghai plunged 45 percent this month to date from the same period last year, according to property research company Shanghai Uwin Real Estate Information Services Co (上海佑威房產信息服務有限公司).
The country’s private housing investment is expected to increase 14 percent next year, matching the gain in 2008, which was the slowest in 10 years, Nomura said. So-called second and third-tier or less affluent cities will drive the nation’s housing demand, the brokerage said.
“In the private market sector, the downturn will be longer than 2008 because the government is taking a different strategy by pushing public housing,” Zhang said. “Private housing will stay weak for quite some time.”
Chinese Premier Wen Jiabao (溫家寶) said this month that the government won’t relax property curbs.
The government this year raised down-payment and mortgage requirements and imposed home purchase restrictions in about 40 cities to avert a bubble. The central bank also increased interest rates three times and reserves ratio six times this year.
Analysts including Barclays Capital Research and asset managers such as CBRE Global Investors are betting price declines will force a policy reversal as the tightening weighs on economic growth.
Zhang said he expects the government to maintain its housing measures and loosen monetary policy “gradually.”
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