the “resilient” growth in real estate investment that seemed to promise a “soft landing” is not very resilient at all. It’s more like the last gasp of a market that’s running out of steam. Once the surge in completions plays out, the declining number of new starts will become the pipeline, and growth in property investment will flatten or go negative. Property investment accounts for roughly a quarter of gross Fixed Asset Investment (FAI), and net FAI accounts for over half of China’s GDP growth. As I noted in January, in a back-of-the-envelope thought exercise, if property investment plateaus (growth falls to zero), it could shave as much as 2.6 percentage points off of real GDP growth. If it fell 10% (in real, not nominal terms) it could bring GDP growth down to 5.3%.
Read it at An American Perspective from China
China Real Estate Unravels
By Patrick Chovanec
( h/t Edward Hugh at EconoMonitor)
Following up on the subject of China, here is a detailed look at the housing bubble bust. In my Predictions for 2012 I suggested China’s GDP growth could fall below 7% this year on its way to an eventual hard landing (below 5%). If the trend above continues this prediction may very well come true.