The first expansion of China’s real estate sector since 2021 coincided with a better-than-expected first quarter GDP reading this week, indicating a more robust recovery for Asia’s second largest economy could be in store if the Chinese housing market were to regain its footing in the near-term. Though sales and home prices have rebounded, investment in new development continues to weaken.
Shares of China’s real estate firms have broadly stumbled lower since an early-year rally in January. Some developers have managed to outperform, but an expansion of business will require fundraising in many cases, likely through the sale of additional equity, which threatens to undermine the sector’s share prices.
Related ETFs and Stocks: Global X MSCI China Real Estate ETF (CHIR), Global X MSCI China Industrials ETF (CHII), Yuexiu Property Company Limited (0123.HK), China Vanke Co., Ltd. (2202.HK)
Per China’s National Bureau of Statistics, the country’s real estate sector expanded for the first time in seven quarters in Q1, growing by 1.3% YoY, and signaling an end to the property market recession that nearly boiled over into a crisis throughout 2021 and 2022. It was a stark change in trajectory from the final quarter of 2022, when the value-add of the real estate continued to contract at a rate of -7.2%. New home prices in March gained 0.5% MoM, the fastest pace since June 2021 and the third consecutive monthly rise.
The bounce in housing no doubt contributed to 4.5% QoQ growth in first quarter GDP, which beat analyst forecasts of 4.0%, published by Reuters. It wasn’t just real estate’s expansion that contributed to stronger growth, however, as all 12 of China’s major industries posted growth for the first time since April-June 2021. Bloomberg notes that Economists are becoming more bullish about China’s economic expansion, with JPMorgan economists increasing their full-year growth forecast to 6.4% this week. Meanwhile, UBS Group raised theirs to 5.7%, while Citigroup’s new projection was set at 6.1%.
Though property sales rose 4.1% YoY and new homes sales were particularly strong, shooting up 7.1%, investment in property remained…
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