- Year-on-year sales in Q1, for all real estate, was down 14.6%.
- Residential property sales were down 17.5%
- Office sales were down -10.2%
- Sales in January-February were a disaster, falling 20.9% overall, compared to the first two months of 2011, -24.7% for residential.
- Total amount of floor space “for sale” was up 35.5%, compared to the same date last year
- Floor space of residential units “for sale” grew 47.4%.
- At the end of 2011, total floor space “under construction” was roughly 4.6 times the floor space sold
- A year and a half worth of excess inventory is hidden somewhere in the pipeline
- New starts in April fell 14.6% year-on-year and 27.0% month-on-month, for property as a whole
- Housing starts fell -14.4% year-on-year and -23.4% month-on-month
- Office starts fell -21.0% year-on-year in April, and -45.1% compared to March
- Retail property starts fell -18.7% year-on-year, and -36.8% compared to March
- Land sale revenues in April (RMB 27 billion) were down -54.7% compared to April last year
- Foreign funding for property development was down -91.4% in March and -80.8% in April, compared to the same months last year.
"Clearly a crash is underway and the Chinese soft-landing thesis is collapsing.
The “resilient” growth in real estate investment that seemed to promise a “soft landing” is not very resilient at all. It’s more like the last gasp of a market that’s running out of steam. Once the surge in completions plays out, the declining number of new starts will become the pipeline, and growth in property investment will flatten or go negative.
Property investment accounts for roughly a quarter of gross Fixed Asset Investment (FAI), and net FAI accounts for over half of China’s GDP growth. As I noted in January, in a back-of-the-envelope thought exercise, if property investment plateaus (growth falls to zero), it could shave as much as 2.6 percentage points off of real GDP growth. If it fell 10% (in real, not nominal terms) it could bring GDP growth down to 5.3%.
At the time I first saw this dynamic in the data, when the Q1 numbers came out, I figured it would take several months to begin playing out. But the April numbers suggest it is already happening.
Not only do I think it is very easy to see... I sometimes think my estimate may be underestimating the full extent of what may play out.
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