China’s Recovering Property Sales Yet to Revive Investment

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A recovery in China’s home sales isn’t translating into a revival for real estate investment just yet, weighing on prospects for an acceleration in economic growth.

Investment in property development slowed to 4.6 percent in the first six months of this year, the nation’s statistics authority said Wednesday, about a third the pace of the same period last year.

Developers just aren’t yet making the leap from higher sales to accelerating projects, suggesting demand for concrete and steel may remain sluggish. China’s real estate sector has been a growth drag, rather than driver, since last year.

“The recovery is not solid until property takes up the baton,” Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong, wrote in a note. “A property recovery, especially home prices, would be the biggest swing factor for policy easing” in the second half, he wrote.

The sluggish investment has also hurt demand for construction workers, which slumped 23.8 percent in the three months ending June from a year earlier, according to a statement from the Ministry of Human Resources and Social Security. The overall ratio of jobs available to job seekers dropped to 1.06 last quarter from 1.11 a year earlier.

For the National Bureau of Statistics, the glass is half full: accelerated destocking of housing will help stabilize the sector, Sheng Laiyun, a spokesman, said at a press briefing in Beijing after data showed gross domestic product increased 7 percent in the second quarter from a year earlier.

“The real estate sector has seen some positive changes in the second quarter,” Sheng said. “The trend of polarization is also clearer” as first-tier and some second-tier cities showed stronger demand while smaller cities struggled.

Property sales jumped 10 percent by value in the first six months as residents of China’s biggest cities snapped up homes again after the government relaxed curbs for housing purchases and cut interest rates to a record low.

— With assistance by Xiaoqing Pi

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