Chinese property

Popping the question

China’s bubblyproperty markets have not burst. Yet

BUBBLES are supposed to burst with an audible pop. But in the snap and crackle of the Chinese housing market, it is hard to hear anythingclearly. On June 9th the
Wall Street Journal
put itsear to the ground and declared that “the great property bubble of China may bepopping”. It pointed out that prices had fallen by 4.9% in the year to April innine big cities tracked by Rosealea Yao of GaveKal Dragonomics, a consultancy.Ms Yao herself thinks a “correction” in the next six months is inevitable. Butshe argues that it is still “a bit early to say the bubble is bursting”.


Official figures released on June 14thadded more noise. They suggested that builders started work on 19% moreresidential floorspace in May, compared with a year earlier, and sold 18% more.But the sales figures were flattered by comparison with May 2010, an unusuallyslow month following a government clampdown on speculative homebuying a fewweeks before. And the starts figures may have picked up the government’s driveto build more affordable housing.


In other countries, such as America,economists can rely on clear signals from credible price indices. In China theNational Bureau of Statistics used to publish a price index spanning 70 cities.But that measure muted both the highs and lows of China’s housing market. Itsuggested that prices for new and existing homes never fell by more than 1.3%during the financial crisis, and never rose by more than 12.8% a year in theboom that followed. That was hard to square with the head-splitting priceshomebuyers were paying in the big cities. People stopped paying attention tothe national index. In December the government ceased publishing it.


The bureau does, however, still track prices in the 70individual cities that made up the index. Weighting the cities by population,and weighting the mix of new and existing properties by floorspace,
TheEconomist
has triedto rebuild China’s abandoned house-price index (see chart) from its constituentparts. Our calculations suggest nationwide prices are still rising—by 4% in theyear to April—but only slowly. The pace of increase has eased steadily for 12months in a row.


In the absence of credible governmentfigures, many analysts have turned to private-sector alternatives. A 100-cityindex published by Soufun, a property consultancy, shows prices rising by 5.1%in the year to May. But in many of those cities its coverage is patchy,especially in smaller localities where developers may not have good,computerised records to share. That is one reason why Ms Yao, who draws onSoufun’s figures, concentrates only on the nine cities it covers best.


The first signs of a sharp reversalmay not show up in prices anyway. The volume of sales tends to drop first,because optimistic developers will try to wait out a bad patch, hoping thatbetter times will return. Despite the 18% rebound in May, most analysts believesales are dropping sharply.


Developers can stay out of the marketonly for as long as they can stay out of the red. As their cash pile dwindlesand liabilities fall due, they will be forced to sell, whatever the marketconditions. To give themselves more leeway, bigger developers have turned awayfrom fickle onshore financing to international bond markets. The 30 developersrated by Standard & Poor’s, a rating agency, raised about $8 billion ofmostly five-year money in the first five months of this year, compared with$8.8 billion in the whole of 2010, itself a record year. Developers can bringthis money back into the country, despite China’s capital controls, providedthey show a bit of patience and a commitment to build things in unfancied cities.


Even so, the debts of many smaller developerswill fall due next year. Standard & Poor’s expects property prices to fallby about 10% over the next 12 months, but it does not rule out a “price war” ifdistressed selling by overstretched developers begins to feed on itself. IfChina’s property market is a bubble, it may end with a squeal as well as a pop.




Clampdown压制,取缔
dwindle 减少,变小,缩小;
square with与...相符合
squeal  尖叫(声)
patchy凑成的;不调合的