China's property investment, sales soften in August

[BEIJING] China's real estate investment cooled in August on slower construction and falling home sales, as authorities' tight controls on the sector continued to take out speculative heat.

A slowing property market could sharply increase the risks to China's economic outlook, especially if a tit-for-tat trade war with the United States worsens.

China's economy, the world's second-largest, is already under pressure from a vigorous multi-year government financial deleveraging campaign to tackle debt risks, and developers have faced a funding squeeze as authorities tightened lending to the sector, although funding appears to have improved of late.

Real estate has been one of the few bright spots on China's investment front, partly due to robust sales in smaller cities, with spending proving resilient against government efforts to tame hot property prices.

Growth in real estate investment, which mainly focuses on residential but also includes commercial and office space, rose 9.2 per cent in August from the same period a year earlier, easing from a 13.2 per cent rise in July, Reuters calculated from National Bureau of Statistics (NBS) data out on Friday.

Property sales by floor area, a leading indicator of market demand, rose just 2.4 per cent in August from a year earlier, down from a 9.9 per cent gain in July. In year-to-date terms, property sales rose 4 per cent in the first eight months.

New construction starts measured by floor area also grew at a slower pace of 26.6 per cent in August from a year earlier, compared with a 32.4 percent gain in July, Reuters calculations showed.

However, funding conditions for China's real estate developers have improved as policymakers doled out more growth-boosting measures that helped overall liquidity.

Developers raised 10.67 trillion yuan (S$2.2 trillion) in the first eight months, up 6.9 per cent from the same period a year earlier, the NBS said. The growth rate compared with a 6.4 per cent increase in January-July period.

August property investment still exceeded analyst forecasts for the full-year. A Reuters poll this week showed property investment was expected to grow 8 percent in 2018, faster than previously thought.

Central bank data this week showed household loans, mostly mortgages, rose to 701.2 billion yuan in August from 634.4 billion yuan in July.

REUTERS