China’s property bubble has burst by Elaine360

“It is no longer a question of ‘if’ but rather ‘how severe’ the property market correction will be,” three of the bank’s analysts say in a new report. “We are convinced that the property sector has passed a turning point.”

 china property

Analysts at the Japan-based broker are among the most critical of China’s property sector,which has powered ahead for years despite frequent warnings that a collapse is just round the corner.

Skeptics say the real estate sector is emblematic of problems such as rapid credit expansion and policies that promote short term growth over a more balanced economy. The building rush means property supply now outstrips demand in some parts of the country.

Bulls counter that the boom is sustainable, especially as hundreds of millions of Chinese migrate into urban areas.

The size of the sector — somewhere between 15% to 25% of the economy — underscores the importance of the debate for a world that is increasingly connected to China.

While most analysts agree that the market in smaller cities is softening, the Nomura team argues the problem is widespread and systemic.

Data show the number of new homes under construction has fallen by around 25%, and the number of property sales has dropped dramatically. Prices are weakening too, especially in small and medium cities.

Adding to the risks of a slowdown, developers are having trouble securing financing and property investment dropped off in the first quarter.

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Senior Director, Coldwell Banker New Homes Division
With over 200 condominium, townhome and loft projects successfully marketed
“Fewer properties for sale with such remarkably low interest rates make it a great time to sell but a more difficult time to buy”