Real estate tycoon Ren Zhiqiang has publicly expressed the opinion that China's real estate market will not come out of the current slump so easily. This is quite a game-changer for a professional who has long been positive about real estate.
In recent years, in fact, Ren Zhiqiang has not failed to repeat that the real estate market would have continuously strengthened thanks to the continuous Chinese economic growth. Now, however, in an interview he argued that, despite a continuing period of growth, the real estate market will be very unlikely to be able to get out of the current state of discomfort.
Ren, president of Huayuan Property in Beijing, has been providing accurate statistics and forecasts for years thanks to his pool of experts. Now he is convinced that the housing market, especially in small towns with a large supply, the situation is serious.
“When the economic trend is down” Ren reiterates “real estate suffers. It is a rule valid all over the world and China is not exempt from it".
The economic data give a far from exciting picture: industrial production marks the slowest pace since 2008 and investments in fixed assets, an important driver of economic activity, have fallen to their lowest level in the last 14 years (16,5% ) in the first eight months of the year. ANZ analysts expect China's GDP growth to fall to 6,5% in the third quarter of the year.
Of the 70 major cities monitored by the Chinese government, 68 experienced lower prime home prices in August compared to 64 in July. This amounts to the biggest drop since January 2011.
Investments in the sector fell to 13,2% in the first eight months of the year. Sales areas and volumes are also declining.
