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Slowdown Hits the Chinese Real Estate Market 04-Sep-2017

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 Should you sell your apartment in China fast in response to the slowdown in the Chinese real estate market? The number of properties for sale in China has risen at its slowest pace for over two years this July 2017. The slowdown in real estate in China affects a range of industries from furniture and cement to electrical supplies and steel.

Home prices rose just 4.3% in July 2017, which is the lowest increase since March 2015 according to the data made available by the National Bureau of Statistics. The problems in China’s real estate sector have been exacerbated by the general slowdown in the economy. The factory output is at a low and investment opportunities are scarce.

Construction activity in China has been very sluggish this year. There has been a decline of 4.9 percent of in the sale of commercial property. Building activity, which is usually frenetic in China, has been tepid, although there is no dearth of people who want to buy property in China quick.

China’s real estate market is one of the biggest in the world, at par with that of the United States. Millions of people are employed in the Chinese real estate sector, and a number of industries depend on it. Any slowdown in the real estate sector will have a major effect on the rest of the Chinese economy.

Wang Tao, chief China economist at UBS Group in Hong Kong says in an interview with Bloomberg News, “The turning point has come. Construction has to come down so that means growth has to slow, and therefore steel demand, cement demand, energy consumption, mining production, appliances, automobiles - everything has to come down.”

Wei Jiangping, a market manager at coal producer Inner Mongolia Yuan Xing Energy Co. adds, “There has been a slowdown in industry and industries have been a big consumer of coal. It's all related: The property industry slows, and that leads to a slowing of demand from the cement and glass industries.”

Patrick Chovanec, a chief strategist at Silvercrest Asset Management Group based in New York says that any slowdown in property investment will certainly have a negative effect on growth.

 “You don't have to have a big crash to have a big impact on the growth rate,” Chovanec explains. “If you just build the same number of condos and villas and apartments that you did last year but no more then it's not a contributor to GDP growth.”

However, economists argue that China is making structural changes to its economy, moving from a manufacturing oriented economy to a service based one. Service based companies such as the internet giant Alibaba have emerged as a major part of the economy, providing millions of jobs.

Stephen Roach, former chief economist at Morgan Stanley explains, “Most people around the world are very negative on China because they see GDP growth slowing. China is shifting its economic growth into more labor-intensive services industries and that's a big deal. It doesn't matter if GDP growth is slowing if employment growth is increasing, and it is.”