Housing panic: China sales growth down 17% this year

Developers have been having a tough time since 2010.

The focus on China’s housing market woes is increasing, and housing developers have been trying the commonly used discount technique and other tactics to revive buyers’ interest.

In a report, Standard Chartered believes that recent international media reports citing promotions by developers as evidence of growing panic in the industry are likely exaggerated.

The worst may not be over for the sector, but we do not see signs of a sudden deterioration into a ‘fire sale’ environment.

Across the 31 cities under StanChart’s coverage, YTD sales growth is down 17% y/y. According to them, this does not look like a collapse - while average monthly sales in 2014 are weaker than during the boom years of 2012-13, they are still above the levels in 2008 and 2011, when slowing economic growth and tightening policies hit the market.

The latest data suggests a further softening of sales in some Tier 1 to 3 cities.

Based on StanChart’s scenario analysis, if apartment sales remain at today’s level, inventories will rise to 25 months of sales by end-2015 from 17-18 months currently.

Despite softness in the market, StanChart thinks a housing collapse is highly unlikely in an economy with the region’s least leveraged household sector. This is a critical point that property-market bears seem to ignore.