Chinese real estate, charted
Earlier this year famed short-seller Jim Chanos told Business Insider he believes Chinese real estate to be the most important single asset class in the world.
His reasoning was real estate represents nearly half of Chinese investment, and nearly half of the Peoples Republic’s GDP is investment. Chinese GDP is $12trn, according to the World Bank, so with global GDP a smidgen over $80trn, this one market accounts for between 3-4 per cent of global GDP, depending how you cut it.
The doom and gloom technocrats of the IMF are also concerned. In April they published a report named “ Stabilising China’s Housing Market”, which noted “a crisis in China’s housing market would be of considerable global concern”.
So what’s going on in this apparently systemic market?
Well, the Hong Kong-listed stocks of China’s listed real estate developers have had a tricky year. Here’s the chart for real estate megalodons Evergrande, Country Garden and Sunac Holdings, representing a collective $227bn of enterprise value, according to Bloomberg
Explanations range from the general — a hit to investor confidence in the Chinese economy due to the escalating cross-Pacific trade war — to the specific — a slowdown in real estate after a barnstorming decade of escalating prices, particularly in Tier 1 cities.
Real estate developers are also among the most leveraged sector in China, according to Macquarie.