Maarten-Jan Bakkum of ING
The chorus of concern regarding China’s slumping real estate sector gained a couple of new and highly influential voices last week when economists for JP Morgan Chase and ING both warned of risks to the nation’s economy.
According to a report from Xinhua, Zhu Haibin, chief China economist with JP Morgan Chase said that although home prices are not likely to collapse in all cities, the real estate slowdown represents the biggest macro risk to China’s economy.
Zhu predicted that average home prices nationwide are likely to decline, but that the biggest downturn is likely to come in second-tier cities that have built up an over-supply of housing. In contrast, the economist said that the biggest property problem for the country’s first-tier cities is an oversupply of office and retail space.
In a separate report, Maarten-Jan Bakkum, Senior Emerging Market Strategist at ING Investment Management noted the dangers that China’s declining real estate sales pose to the wider economy, and predicted continuing deterioration in the sector during the months to come.
In particular, Bakkum saw the country’s real estate issues hurting the economy’s competitiveness internationally. “China currently has the weakest growth momentum of all emerging economies,” he said. “In particular sales and price dynamics in the real estate sector continue to be outright negative.”
The latest market data seems to only add to the pessimism surrounding the market. Following double-digit declines in sales during the first quarter of this year, April saw residential sales volumes in Beijing and Shanghai decline by 18 percent and 17 percent respectively, the economist added in his report.
Ratings Agency Also Warns of Trouble
On Friday, ratings agency Fitch also sounded concerns about China’s macroeconomic situation.
After reviewing April’s macro data, Fitch reconfirmed their prediction of 7.3 percent economic growth for 2014 in China, and also found the property market to be the biggest area of concern.
If the agency’s prediction comes true, it would mean the slowest growth for the world’s second largest economy since 1990. Fitch found that demand and production indicators have been almost universally weaker through the first four months of 2014, with slowdowns in investment, consumer demand and industrial value-added growth.
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