China: Housing data weakens in May
In January–May, indicators for property investment, the sale area of commercial housing and real estate funding all worsened relative to January–April. For instance, the contraction in property investment steepened to 7.2% year on year from 6.2%. Moreover, the real estate climate index worsened in May, while house prices for 70 key cities fell in annual terms in the same month according to data compiled by Macrobond.
As such, the property sector appeared to lose further steam following an incipient recovery in Q1. While the broad-based loosening of government restrictions on the sector over the last year has provided support, real estate is still being weighed on by subdued consumer sentiment, population decline and indebted developers.
On the outlook, Goldman Sachs analysts said:
“We only assume an ‘L-shaped’ recovery in the property sector in coming years, taking into consideration the ‘housing is for living in, not for speculation’ policy mantra, persistent weakness in lower-tier cities, and still-tight financing conditions for private developers […]. We estimate the property weakness will likely be a multi-year growth drag for China, but it could be less painful in 2023 (-1.0pp to headline GDP growth) than in 2022 (-2.2pp).”