China's Nov property investment rises but soft sales signal problems

PROPERTY investment in China picked up in November, in contrast to other key data where growth weakened sharply, though soft home sales and land purchases pointed to a dim outlook for the sector amid a slowing broader economy. Real estate investment, which mainly focuses on the residential sector but includes commercial and office space, rose 9.3 per cent in November from a year earlier, accelerating from 7.7 per cent in October, according to Reuters calculations based on data released by National Bureau of Statistics (NBS) on Friday. China reported retail sales grew at their weakest pace since 2003 and industrial output rose the least in nearly three years in November. For the first 11 months, property investment increased 9.7 per cent from the year-earlier period, the same percentage as in January-October. In the previous months, the percentage increase had dropped for three months. The upbeat headline number for November was largely buoyed by more construction starts. Measured by floor area, such starts surged 21.7 per cent from a year earlier, up from 14.7 per cent in October, according to Reuters calculations. "After busy land acquisition under high leverage early this year, developers now are rushing to launch new construction and kick off presales in hopes to collect cash as quickly as possible as financing pressure mounts," said Nie Wen, economist at Hwabao Trust in Shanghai. In China, the sales process usually begins soon after construction starts, and historically most apartments are sold before they are completed. However, after strong growth in 2016 and 2017, sales have been subdued this year, on the back of tighter controls to cool property prices. As worries about the economy increase, potential home buyers tend to grow more cautious about spending. In November, property sales by floor area, a major indicator of demand, fell 5.1 per cent from a year earlier, compared with October's 3.1 per cent drop. In the first 11 months, property sales by area rose 1.4 per cent from a year earlier, official data showed. Analysts predict the softer sales will constrain price growth in coming months, dampening developers' appetite for front-loading construction.