China headed for soft landing as housing stabilises – report

China’s housing market is starting to stabilise and its economy is headed for a “soft landing”, according to CBRE.

Policy measures implemented by the Chinese government are having a positive effect on the housing market and the outlook of the economy, the company said in a report.

Global chief economist Richard Barkham said: “Recent improvements in the Chinese housing market suggests that policy measures being implemented by Beijing, taken well before the current stock market turbulence, are starting to work.”

China’s economy, he said, is “likely heading for a soft landing”.

With concerns over the state of the Chinese economy intensifying, CBRE said year-on-year growth in house prices in China should help offset recent losses in the Chinese stock market.

China’s growth is linked to the housing market via construction activity, with between 5% and 7% of China’s GDP coming from construction output, CBRE said.

China’s social housing programme offsets any slowdown in the private sector, it said, with a current wave of stimulus now targeting infrastructure development.

“Even so, the fall in house prices has been a drag on economic growth, though the forces of urbanisation will remain in play over the long term,” CBRE said.

“The uptick in house prices in Shenzhen and Shanghai, as well as signs of stabilisation in Beijing, is very good news indeed, although it will take some time for this to feed through into the economic numbers.”

In a separate report, CBRE found that cross-border real estate capital flowing out of China exceeded $10bn for the first time.

What began with China’s sovereign wealth funds and tier-one insurers purchasing high-profile trophy assets abroad has now spread to acquisitions by mid-tier insurers and corporate investors, CBRE said.

Meanwhile, Chinese real estate developers have also been active, expanding into overseas markets in a bid to meet increasing demand from mainland high-net-worth investors (HNWIs).

Frank Chen, executive director and head of research at CBRE China, said the past two years have seen an “explosive growth in purchases of offshore real estate by Chinese investors including HNWIs, corporations and institutional investors”.

“For Chinese developers, the main drive to purchase offshore property is not simply to establish office premises for global expansion, but rather to meet increasing demand from mainland HNWIs for residential properties in key offshore destinations.”

Mainland institutional investors, he said, were mainly motivated to invest in offshore property to obtain access to a wider array of investment opportunities and diversify a growing pool of domestic wealth.