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Will China’s Property Market Slow Down in 4Q17 and Beyond?

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Dec. 1 2017, Updated 7:31 a.m. ET

China property sector

To track demand for steel and iron ore, it’s important to keep tabs on the developments in the Chinese real estate market (TAO). This sector directly impacts 40 other sectors in China. It’s also the most steel-intensive sector, constituting more than 50% of the total steel consumed in the country. In this part, we’ll look at the Chinese property market indicators to gauge their outlook.

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Property growth slowing down

China’s property sector seems to be cooling down due to tighter liquidity. Real estate investment growth fell to 5.6% year-over-year (or YoY) in October from 9.2% in September 2017.

New construction starts and property starts have also fallen. New construction starts, measured by floor area, fell 4.3% YoY in October. The floor area of property sales fell 6.0% in October YoY.

House prices

Home prices in large cities have also softened in October, marking the first time since 2016 that home prices in ten major cities saw a YoY fall in October. In September, just three cities saw a fall. Both new and second-hand home prices reported slower growth for the thirteenth consecutive month in October 2017. Tough measures implemented by the government have led to cooling housing demand and prices.

Lackluster growth in the Chinese property market means a tougher time ahead for iron ore miners such as Vale (VALE), BHP (BHP)(BBL), Rio Tinto (RIO), and Cleveland-Cliffs (CLF).

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