Franklin Bain Advisors report that adrenaline shot from China housing boom may spur 2017 hangover

Press Release ( - CENTRAL DISTRICT, Hong Kong - Oct 19, 2016 - Franklin Bain Advisors Analytical team conclude with attempts to avert a bubble intensifying — property curbs have been rolled out in at least 21 cities and developers even banned from using words like ‘exclusive’ and ‘cheapest’ in advertising — that boon to realtors pay checks may be about to end.

“This poses a dilemma ( for policy makers, who want to avert a potentially ruinous housing bubble without killing one of the economy’s main pillars of growth.” Reported Doug Whitman, Senior Analyst at Franklin Bain Advisors. “Most curbs introduced so far have been aimed at cooling property speculation by limiting people from buying multiple properties and raising down-payment requirements, rather than shackling developers.” He concluded.

“The central government is cautious about the idea of property-led growth,” said Doug Whitman. “While it helps stabilize economic momentum, it doesn’t facilitate supply-side structural reforms.”

The value of new home sales (…) surged 61 percent in September from a year earlier, almost double the pace of the previous month. The buoyant property industry helped the world’s second-biggest economy (…) grow 6.7 percent in the third quarter from a year earlier, bang in the middle of the government’s 2016 goal of 6.5 percent to 7 percent growth.

Developers — who had been exhibiting relative caution given their stockpiles of unsold homes in smaller cities — showed signs of buying into the boom.

“The readings show the economy is quite stable for now, with support mainly from property and infrastructure,” said Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong. “The down cycle may start to show next year as the tightening measures on property start to weigh in.”

With exports weighed by tepid global growth, a reversal in property would raise question marks over whether the economy’s current stabilization will hold in 2017.

“Growth in property investment won’t soon see a quick plunge,” said Chen Shen, a Shanghai-based analyst at China Securities Co. “But given signs the government will post tighter controls over developer financing and the land market, pressure is looming.

Source : China

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