Slowing Chinese Property Market

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The August data showed a further slowing of China’s property price boom, and early signs that a slowdown if not a downturn could be on the way for perhaps the world’s most important property market.  The bubbly price gains in China’s property market has been a key theme for China macro and commodities and a driving force behind the global reflation theme.  Yet, the associated pickup in inflation and vulnerabilities from a rising debt load has made the job of the PBOC increasingly harder – as the final chart shows it may not take much to push China’s property market into a downturn…

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The rebound in China's property market has been a key part of the cyclical upturn in the Chinese economy and jump in industrial metal prices, so the stakes are high.  We've documented a number of times in our research reports that the outlook features several gathering clouds for China's property market.  This means that the very strong run in industrial metals will have a limited lifespan, and if the Chinese property market does go all the way into a downturn (vs just a slowdown) it will likely precipitate some of the many and well known risks in China's economy.  As I've said before, if you want one indicator to watch to get the macro-risk outlook for China, just watch property, and now is the time to pay more attention than ever.
China's property price bubble is topping out: average annual price gains have clearly rolled over and breadth across the 70 cities has peaked and started to fall.

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One of the leading indicators we monitor is M1 Money Supply growth, and the turn down in this indicator is pointing a further slowing in property price gains.  At best price gains will slow, at worst the Chinese property market may actually go into a downturn.

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