Friday, October 21, will be a most important date for economic data from China — not trade, inflation or third-quarter GDP, but the latest on house price movements in September. The size of the increase will underline what has now become an official concern in China about the bubble-like housing rebound and its potential to damage the economy. At least a dozen Chinese cities, including Shanghai, Nanchang, Beijing, Guangzhou, Shenzhen, Suzhou, Chengdu and Wuhan moved during last week’s holidays to tighten the rules and restrictions on property purchases and mortgage down payments.
For example, Xinhua newsagency reported that Nanchang, capital of east China’s Jiangxi Province, adopted a spate of measures to restrict home buying. Local residents who own one or more houses will not be allowed to buy new homes in some parts of the city, people without a local household registration certificate who own one or more houses will not be able to buy either new or pre-owned houses, and first-time home buyers will be required to make a minimum down payment of 30%, compared to 20% previously (that is what the RBNZ is trying to do in New Zealand to slow its boom — lifting the deposits needed to buy homes, and cracking down on investor purchases). The August house price data from the National Statistics Bureau in China showed more than 90% of cities in the monthly survey reported new home price rises, up from 73% in July. Prices in Shanghai rose 37.8% year on year respectively, compared with 33.1% in July. And the Statistics Bureau revealed that cumulative real estate sales in value terms totaled Rmb6.662 trillion (US$997.6 billion) for the first eight months of the year, up 38.7%. In volume terms, floor space sold during the same period grew 25.5%.
And what does this mean for Australia? The wider and more intense the crackdown, the greater the possibility of another downturn in prices in early 2017, and like we saw in 2014 and 2015 another fall in iron ore and coal prices, just as they are looking good again.