A collapse of the real estate sector in China is unlikely despite concerns of overheating credit and an overall cooling of the economy, due to continuing strong domestic demand for property, global real estate consultant CBRE Group said in a report last week.
Citing government statistics, CBRE pointed out that the real estate sector accounted for 8 percent of GDP growth in the third quarter, while related sectors such as steel and concrete production showed further signs of recovery and helped to offset declining foreign trade figures.
In its forecast, CBRE said that China’s GDP may weaken slightly in the last quarter of the year, but that full year growth should still be comfortably within the official target of 6.5 percent to 7.0 percent. “As the economy remains on track, CBRE Research believes overall economic policy will turn more risk-averse to guard against any deterioration in growth. Less aggressive monetary policy and slower residential sales due to recent policy tightening in upper tier markets are likely to place downward pressure on the economy in Q4 2016,” the report said.
One indicator that bodes well for the property sector, the report added, is the growth in the services sector, which reached 7.6 percent year-on-year in Q3 2016. This should continue to drive strong demand for office and other commercial space, CBRE suggested.
On the other hand, real estate loan growth is expected to slow in the coming months due to policy tightening in upper tier cities. “Mortgage loans accounted for approximately 55 percent of total loans issued in Q3 2016, but the ratio began to decrease in September,” the report explained.