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Chinese Real Estate Demand Drops Again in April

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Chinese real estate demand indicators

As noted in the previous part of our series, building sales in China declined by 9.3% in March. But there are several other Chinese real estate demand indicators that you can track. On April 15, the National Bureau of Statistics of China released monthly indicators for the Chinese real estate market.

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Land area purchased

Purchasing land is the first step in the construction of any building. The chart above shows the area purchased by Chinese real estate development enterprises. The data are released on a monthly basis by the National Bureau of Statistics of China. In the first three months of the current year, real estate development enterprises purchased 40.51 million square meters of land. This represents a year-over-year decline of 32.4%

As of March, construction had started on 237.24 million square meters, a year-over-year decline of 18.4%. The total floor space under construction stands at 5,840 million square meters, a year-over-year increase of 6.8%.

Real estate climate index

China’s real estate climate index, which measures the aggregate business activity for land and real estate, dropped to 93.1 in March. Figures above 100 indicate economic growth, while readings below 100 indicate a slowdown in China’s real estate market.

The latest data points reconfirm a negative trend. A slowdown in Chinese real estate demand is negative for metals such as steel and copper. Companies including Freeport McMoRan (FCX) and BHP Billiton (BHP) are negatively impacted by this slowdown. China (EWZ) is a major market for these companies.

Teck Resources (TCK) supplies steelmaking coal to China. It currently forms 0.35% of the iShares North American Natural Resources ETF (IGE).

The automobile and industrial sectors are among the other major copper consumers in China. In the next part, we’ll analyze indicators in these sectors.

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