Data on China’s real estate sector in October was the weakest since the major contraction in 2015. Indicators of construction activity and house prices were all weak and the sector is expected to continue to weigh on steel demand, Kallanish notes.
Completed investment in real estate is still up 7.2% year-on-year to CNY 12.493 trillion ($1.98 trillion), according to the National Bureau of Statistics (NBS). That implies however that in October investment was down 5.4% y-o-y at CNY 1.237 trillion. Falling investment has come amid credit tightening and developers being forced to offload apartments at a discount.
Real estate sales by volume were up 7.3% y-o-y at 1.43 billion square metres over ten months, but in October they were down 21.7% y-o-y at 123.9 million sqm. Average prices also fell in October to CNY 9,749/sqm, the third consecutive month of decline and the lowest since April 2020. The NBS survey of 70 cities showed new house prices falling on-month in 52 cities, the most widespread decline since early 2015, when rebar prices fell to less than half their current level.
Weak prices and financing are likely to keep steel demand low for some time. Indicators of construction are all collapsing. New starts year-to-date are now down 7.7% at 1.667 billion sqm, with October new starts down 33.1% y-o-y at 137.92m sqm. Completions meanwhile are still up 16.3% y-o-y year-to-date at 572.9m sqm, as developers rush to market to raise cash to pay off their debts. Despite this, October saw completions drop 20.6% to 62.77m sqm as this strategy starts to run out of steam and developers seek to avoid collapsing prices further.
A very brief rebound in futures prices was triggered last Thursday on reports that China would allow developers more leeway in managing their debts by issuing bonds. China now faces a decision over how hard it can press the real estate sector without triggering a wider economic slump.