Chinese property set for modest recovery

After a period of sharp contraction in 2008 and 2014, a modest recovery is expected over 2015 as Beijing continues its reform agenda and monetary easing.

In a recent report, entitled China Property: Light at the End of the Tunnel?, Neuberger Berman said the Chinese property market is vital given its contribution to the country’s economic growth. 

Neuberger Berman senior credit analyst, emerging markets debt, Doreen Saik said: “Continued strong government support and improved funding should ensure the stabilisation of the sector and bring back home buyers.” 

“The government has intervened aggressively, with supportive sector-specific policies and easier monetary conditions starting in the second half of last year.

“We believe China will continue to provide active support to the sector through a number of channels – which should trigger a modest recovery over the rest of 2015,” Ms Saik said. 

In a NAB Group Economics report – China's economy at a glance – it is argued that “concerns around a major crash in property prices continue to erode”. 

NAB, in reference to data by China Index Academy, reported that property prices rose 0.1 per cent month-on-month in May 2015. 

It is hoped that as the property sector stabilises, there will be a pick-up in construction and a subsequent increase in demand for Australian resources. 

“Now, the array of funding sources for developers has increased. 

“This includes not only traditional construction loans, trust financing and offshore bond markets, but also stock offerings (made easier by the recent equity boom) and the onshore bond market, which was recently reopened to developers after six years of inactivity,” Ms Saik said. 

However, NAB is not convinced the sector is improving enough for there to be an increase in demand for Australian resources.

Residential construction fell by -17.6 per cent year on year, the report found. 

“With construction a key source of demand for steel, this points to continued weakness in demand for Australian resources,” said NAB Group Economics.