Greater China

Signs that China’s battered housing markets have bottomed out

Cape owners will be hoping that the bottom has been reached in China’s real estate rout, which has hit global iron ore shipments hard in the first half of the year. Housing is a key driver for China’s iron ore needs, the nation accounting for roughly 70% of all global seaborne iron ore imports.

According to analysts at broker Braemar capesize trade volumes have come in lighter than expected this year due to relatively weak iron ore shipments.

“Iron ore exports have disappointed so far in 2022, with total export volumes down around 27m tonnes year-to-date versus last year,” a new capesize report from broker Arrow stated.

Splash reported earlier this week how increased coal shipments have helped cushion the capesize blow this year from China’s limited iron ore appetite.

Some developers have even resorted to accepting wheat or garlic as downpayments

The housing boom in the People’s Republic came to a shuddering halt in recent months largely thanks to rolling lockdowns across many cities combined with the shaky financial setup of many of the nation’s biggest real estate developers. The situation has become so desperate that some developers have even resorted to accepting wheat or garlic as downpayments. Another state-run developer in Jiangsu province is offering a 90 kg pig, which it will slaughter, free of charge, for anyone buying a house.

Local governments are also doing their bit to prop up the battered real estate scene. The authorities in Yulin in Guangxi province are offering a job to anyone who makes a home purchase.

Signs of improvement in the housing market have emerged this week after local governments eased some buying curbs and authorities cut mortgage rates.

The 100 biggest real estate developers saw new-home sales slide 43% in June from a year earlier to RMB733bn ($109bn), according to preliminary data from China Real Estate Information Corp. Compared with last month’s, however, their sales climbed 61.2%.

New-home sales in 17 cities monitored by China Index Holdings surged 89% in June from a month earlier, also helped by a loosening of covid restrictions.

“In the short term, the market has bottomed out, but the recovery is a slow and gentle process and will take time,” China Vanke chairman Yu Liang said at the company’s annual general meeting on Tuesday. Vanke is one of the country’s top property developers.

There are other signs that China’s economy is finally picking up as government eases its harsh covid rules.

China’s factory and service sectors snapped three months of activity decline in June. The official manufacturing purchasing managers’ index (PMI) rose to 50.2 in June from 49.6 in May, the National Bureau of Statistics (NBS) said. This marks the first time since February that the PMI has risen above the 50-point mark that separates contraction from growth.

A sub-index for production stood at 52.8, the highest since March 2021, while new orders also returned to expansionary territory for the first time in four months, although growth remained weak.

Looking ahead, researchers at dry bulk advisory Commodore Research are confident that China’s iron ore demand will pick up in the coming months.

“For the dry bulk market, we continue to expect that an iron ore restock will be occurring in China at the same time that Brazilian and Australian iron ore output are undergoing their seasonal strength,” Commodore stated in a report published this week, adding: “China’s housing market remains weak, but it has at least shown some improvement recently.”

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.
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