The Wall Street Journal is reporting that China’s battered real estate market may be on the mend. If this market does turn around, it will reduce the chances that the country’s already slowing economy does not completely stall out in the second half of this year.
According to a survey of property developers and real estate firms, the average price of housing in 100 major Chinese cities rose in June from May. This comes after nine straight months of decline. The survey followed other signs that China’s real estate market may have bottomed, including a pick-up in real estate investment in May and a far shallower drop in property sales during that month compared with April.
The survey revealed that prices for housing in the country’s largest cities strengthened the most, including Beijing, Shanghai, and Shenzhen. Sales also were on the rise. In Beijing, for example, sales rose 10.5% in June from May to 25,602 units. That level is 50.6% higher than the year ago level. Separately, Standard Chartered reported that sales of apartments in China’s largest cities have started to increase thanks to two years of declining prices and lower interest rates.
The rebound in Chinese real estate is an important development for the global economy and investors around the world. That is because, according to GK Dragonomics, real estate and property construction account for about 11% of the Chinese economy. And the share of the economy is about twice that when accounting for other industries like appliances and furniture that are tied to real estate. Bottom line for investors is that, if the rebound continues, China will be on the prowl for all sorts of goods and services again, particularly commodities.
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