Sunday, 13 November 2011

China property dip may have global effect aap

China property dip may have global effect

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On Sunday 13 November 2011, 21:36 EST
China's property market, a mainstay of the world's second-largest economy, has started to suffer a downturn that could have a knock-on effect on global trade in commodities, analysts warn.
House-buying demand has fallen across China after authorities, fearing a property bubble, banned second home purchases in places including Beijing, increased minimum downpayments and trialled property taxes in some cities.
At the same time, property developers have been hit by a lack of funds after the government hiked interest rates and restricted bank lending to rein in surging inflation and bring real estate prices into line.
Last week, Premier Wen Jiabao dashed hopes that measures to control the property market would be relaxed, saying these would not change and adding housing prices should now return to "reasonable levels".
Yao Wei, a China economist at Societe Generale based in Hong Kong, said: "On the global economy, the biggest impact would be on the commodity sector.
"If China's property sector goes through a downturn, the demand for things like cement, steel, concrete, aluminum will all be affected."
Last month, 177 property agencies shut down in Beijing alone after sales nose-dived, according to a report published this week by Home Link China, one of the country's biggest estate agencies.
There are now more than 120,000 unsold properties on the market in the capital, the most in 29 months, the Beijing News said, citing official figures released Friday.
And in Shanghai, hundreds of angry home buyers have launched a series of protests since October after developers slashed prices for some new projects, causing an outcry among those who had just bought at higher levels.
Potential buyers are now holding off as they wait for the prices to fall further, making it hard for estate agents and developers to get apartments off the market.
In the eastern city of Yueqing, one property firm even offered a brand new BMW car to the first 150 buyers of flats in a new residential complex.
Priced at about 300,000 yuan ($A46,000), the BMW makes up roughly 13 per cent of the price of an apartment in the compound. Other developers are also offering incentives such as free garages or air-conditioning.
"I do expect a negative impact for several months, if not quarters," Zhang Zhiwei, an analyst from Nomura Securities in Hong Kong, told AFP.
"Prices are just starting to fall and sales data in October looked pretty bad."
Ratings agency Standard & Poor's said last month it expected China's property prices to fall by 10 per cent nationally over the coming year.

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