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China’s Property Market: Gauging the Impact on Iron Ore

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China’s property sector

China’s real estate sector is the largest consumer of steel, making up more than half of total steel consumption. To track the Chinese demand for iron ore, it’s vital to keep track of the changes in the real estate (TAO) market. 

In this article, we’ll look at the Chinese property market indicators to gauge its outlook.

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House prices

China’s new home prices had grown 8.3% year-over-year (or YoY) in August, which decelerated to 6.3% in September.

According to the National Bureau of Statistics (or NBS), the average new home prices in China’s 70 major cities grew 0.2% in September compared to August. According to Reuters, this trend comes after seeing substantial increases in the last two years.

Property growth

According to the NBS data, the fixed asset investment (or FAI) grew 7.5% in the first nine months of 2017 compared to 7.8% growth registered in the first eight months of the year. This marked the sixth straight month of slowing growth.

The investment in property, however, grew at a faster clip of 8.1% in January–September, which is up from 7.9% in January–August.

The housing sales growth measured by floor area, on the other hand, rose 10.3% for the first nine months compared to 12.7% in the first eight months. The housing sales growth also declined from 17.2% in January–August to 14.6% in January–September. The property curbs put in place by Chinese authorities have been yielding results.

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. This trend could be negative for miners such as Vale (VALE), BHP (BHP) (BBL), Rio Tinto (RIO), and Cleveland-Cliffs (CLF).

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