Housing Market is China’s Biggest Risk

China’s slowing property market poses the most substantial macro risk to its economy in the coming quarters, analysts at JP Morgan said.
If real estate investment were to slow another 5 percent, it could shave 0.6 percentage points from China’s already-flagging gross domestic product growth rate, according JP Morgan analysts. However, the risk of an actual house-price collapse remains limited as the authorities still have room for policy adjustment, they added.

“A housing market adjustment may pose the biggest macro risk in China in the coming quarters, mainly via a slowdown in real estate investment and a decline in land sale revenues,” the analysts said.

China’s property market has turned a corner this year after government-imposed restrictions successfully cooled the previously frothy market.

After a bumper 2013 home sales in the first four months of 2014 fell 9.9 percent in value terms versus a 26.6 percent rise in 2013, JP Morgan’s data showed. Meanwhile, home inventory in China’s ten largest cities increased from 10 months’ sales at the beginning of the year to 17.7 months in April.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza