The August data showed a further slowing of China's property price boom, and early signs that a slowdown if not a downturn could be on the way for perhaps the world's most important property market. The bubbly price gains in China's property market has been a key theme for China macro and commodities and a driving force behind the global reflation theme. Yet, the associated pickup in inflation and vulnerabilities from a rising debt load has made the job of the PBOC increasingly harder - as the final chart shows it may not take much to push China's property market into a downturn...
The rebound in China's property market has been a key part of the cyclical upturn in the Chinese economy and jump in industrial metal prices, so the stakes are high. We've documented a number of times in our research reports that the outlook features several gathering clouds for China's property market. This means that the very strong run in industrial metals will have a limited lifespan, and if the Chinese property market does go all the way into a downturn (vs just a slowdown) it will likely precipitate some of the many and well known risks in China's economy. As I've said before, if you want one indicator to watch to get the macro-risk outlook for China, just watch property, and now is the time to pay more attention than ever.
China's property price bubble is topping out: average annual price gains have clearly rolled over and breadth across the 70 cities has peaked and started to fall.
One of the leading indicators we monitor is M1 Money Supply growth, and the turn down in this indicator is pointing a further slowing in property price gains. At best price gains will slow, at worst the Chinese property market may actually go into a downturn.
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