China Real Estate: Unsold Inventories Continue To Rise25 July, 2011, 17:12. Posted by Zarathustra
Tags: Real Estate
After continuous rounds of curbs, real estate inventories in various cities have been rising to record on the back of thin volume, although prices are still holding pretty well according to Xinhua.
Unsold inventories in Beijing has reached 107,000 units as of 20 July according to the report, which would take almost 15 months to clear based on the transaction volume for the first half of the year, even without taking new supply coming on stream in the remainder of this year. In Shanghai, unsold inventories amounted to 53,948 units. In Guangzhou, unsold inventories reached 73,728 units. Inventories are also on the rise in second and third tier cities like Shijiazhuang, Zhengzhou and others.
Here comes the so-called “puzzle” as expressed in the report: why prices haven’t fallen much yet. In fact, it is hardly very surprising even though corrections have almost become inevitable. Real estate investment is not a very liquid investment, and it can be really hard to sell even if you are very eager to sell, especially in such market with contracting volume. With inflation seemingly out of control and limited investment opportunities, it seems as though very few would be really expecting prices to fall even though it is actually almost inevitable. As a result, I suspect that perhaps only a few are really eager to sell-off their holdings.
It is then hardly surprising that properties shares prices performance often lead the physical property markets at major turning point (although there is no conclusion on the exact length of the lead time). As mentioned earlier, Chinese real estate sector stocks have been doing rather badly for more than a year now, and today’s sell-off in Chinese stocks market (Shanghai and Shenzhen) was led by some massive sell-off in real estate sector stocks. Thus as far as the real estate stocks are concerned, things are not looking good. And if that is a good indicator, the physical market is not looking good either.