China 2015 property investment slows to seven-year low, sales improve

China's property investment growth eased to 1 percent in 2015, the slowest in nearly seven years even as national sales improved, and the pace will likely turn negative this year as developers slow new construction due to oversupply.


Real estate investment, a major driver of the economy which affects more than 40 other sectors from cement to furniture, grew last month at its slowest since February 2009, according to data from the National Bureau of Statistics (NBS) on Tuesday.The 2015 growth rate compared with an annual rise of 1.3 percent in the first 11 months and 10.5 percent in 2014.

Real growth adjusted for inflation in 2015 was higher at 2.8 percent due to softer construction material prices, compared with 9.9 percent in 2014.

New housing starts declined 14 percent as developers were still selling off bloated inventories of unsold homes, though inventory floor area was still 15.6 percent higher than a year earlier, but down from 16.5 percent in November.

"New starts' decline may accelerate to 20 percent this year, which means property investment will be worse than last year. It is likely to turn into a drop," said Gavekal Dragonomics economist Rosealea Yao in Beijing.

A slowdown in property investment will continue to be a drag on the world's second-largest economy, despite warming home prices.

"Inventory increase is slowing, but the slowdown is caused by lower new starts, which doesn't mean demand is growing stronger. With the demand not so strong, the way to maintain a low inventory level is to build even less," CLSA analyst Nicole Wong said.

Property sales hit 1.3 billion square meters in December, up 17.6 percent from November and 6.5 percent higher than a year earlier.

While the housing market bottomed last year after the government rolled out a raft of support measures, inventory in third- and fourth-tier markets, which account for around 60 percent of national sales, remains high.

The government said last month it would undertake more measures to tackle property inventories, including helping migrant workers buy homes in cities.

"The balance between demand and supply in the cities we're in has improved a lot...so we don't need to push for destocking in these cities," said an official of state-backed China Resources Land (1109.HK), with 74 percent of its projects in major cities.

"But we're not talking about the third-tier cities here. We are offering promotions in the smaller cities to push sales," the official said.

Goldman Sachs analyst Yi Wang said in a research report last week the government should do more to promote destocking.

"(Government should also) manage the supply carefully by supporting industry consolidation, rather than encouraging the premature resumption of property investment growth."reuters