China’s residential building boom is petering out, with the effects seen from slumping steel and cement prices, to electricity use, rail-freight traffic and retail sales.
The drag will be long lasting with home completions set to fall by 1 to 3 percent annually from next year to 2025 after almost tripling in 13 years, according to Beijing-based research company Gavekal Dragonomics. A once-in-a-generation shift in demand for housing and an overhang of supply suggests policy makers can cushion the effect with interest-rate cuts such as the one announced Nov. 21, not reverse it.
“The turning point has come,” said Wang Tao, chief China economist at UBS Group AG in Hong Kong. “Construction has to come down so that means growth has to slow, and therefore steel demand, cement demand, energy consumption, mining production, appliances, automobiles — everything has to come down.”