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Key Chinese Real Estate Indicators Investors Should Track

Mohit Oberoi, CFA - Author

Aug. 18 2020, Updated 6:30 a.m. ET

Chinese real estate indicators

In the previous part of this series, we saw that the land area purchased by Chinese real estate development companies went down 33.8% year-over-over in the first six months of 2015. In this part of the series, we’ll look at a few more indicators related to the Chinese real estate sector.

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New construction has declined

In the first six months of 2015, construction was started on 674.79 million square meters in China, a year-over-year decline of 15.8%. You can see this drop in the above graph. The pace of decline in new construction starts has narrowed marginally compared to May. But construction activity continues to be on a negative trend.

What’s more, the floor space of completed buildings fell 13.8% over this same period. The sharp fall in building completion is particularly negative for the copper industry. Copper is used in connection with plumbing material and electrical fittings when a building is nearing completion.

Negative for the steel industry

The decline in construction starts in China is negative for the global steel industry. As construction activity slows down in China, steel demand is bound to take a hit. The tremors from a Chinese slowdown are felt deep inside US borders as well. Steel exports from China have surged, while its domestic demand has quieted down.

Steel companies like Nucor (NUE), Steel Dynamics (STLD), and AK Steel (AKS) have been complaining a long time about steel imports from China and other countries. Nucor currently forms 4.24% of the SPDR S&P Metals and Mining ETF (XME) and 2.49% of the Materials Select Sector SPDR ETF (XLB).

In the next part, we’ll look at China’s real estate climate index.


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