Goldman Not Worried About Chinese Housing Slowdown

October 23, 2014 Share Print 0

China’s property market looks to be on shaky ground with home sales flagging and prices declining, but Goldman Sachs isn’t fretting about a sharp downturn in the sector.

“Our bottom line is that the Chinese housing market has some clear signs of ‘froth’,” Andrew Tilton and Hui Shan, economists at the bank, wrote in note. “But with several sources of pent-up demand, policymakers have a broad array of tools to deploy (and have even started to deploy some) to help support the housing market,” they said.

The bubble in the housing market has been generated more from the supply side – overbuilding by developers— rather than the demand side whereby households leverage up to purchase beyond their means, Tilton and Shan said.

This means there is still scope to stimulate demand should policymakers desire to do so, they said, noting that rapidly-rising incomes and continued urbanization ensure a large pool of potential buyers in the country.

“Chinese policymakers are attentive to the risks and can avail themselves of a particularly broad array of tools to smooth the adjustment path and limit risks,” they said.

via CNBC

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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.