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Iron Ore Prices Are in a Bear Market: What’s Next?

PART:
1 2 3 4 5 6 7 8 9 10
Part 8
Iron Ore Prices Are in a Bear Market: What’s Next? PART 8 OF 10

China Property Sales Growth Slows Down in August

China’s property sector

Real estate directly impacts 40 other sectors in China. It’s important for iron ore investors to track China’s real estate growth (TAO), as this sector accounts for the majority of steel consumption in China. In this article, we’ll look at the Chinese property market indicators to gauge its outlook.

China Property Sales Growth Slows Down in August

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House prices

In August, the new house prices in tier one cities grew at an annualized rate of less than 5%, which is quite low as compared to the 30% growth rate achieved early last year. As per Reuters, the home price growth in August was just 8.3% year-over-year (or YoY), which is the slowest growth rate in over a year. According to Westpac, in August, the annual growth in tier one new home prices has fallen below the growth in tier two and tier three homes, which is the first time that this has happened.

Property growth

Westpac’s Elliot Clarke also feels that fixed asset investment should continue to slow through next year. He believes that the residential construction sector in China is maturing and the future growth cycles will be muted in comparison to growth we have seen. Chinese property developer stocks are also getting battered, in part because Chinese authorities are putting property sales restrictions across eight major cities.

As authorities are coming down on credit growth and imposing other restrictions in the property market directly, the sector might be in for a slowdown, which would be negative for miners such as Vale (VALE), BHP (BHP) (BBL), Rio Tinto (RIO), and Cleveland-Cliffs (CLF).

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