More Bad News For China’s Sorry Real Estate Market, UBS Says
The hits keep on coming for China’s economy.
This time the news is the country’s already beleaguered real estate sector is set for more bad news.
“Property activities are likely to fall further in the coming quarters, and without policy easing, property sales and starts could fall 20% or more by 2022,” states a recent report from Swiss bank UBS.
The current and near-future prospects for China’s property sector is the result fo spillover from the Evergrande debt debacle earlier this year, policy tightening by the Chinese government, and shifts in domestic demand, the report explains.
In turn, a real estate slowdown could hit the broader economy hard slowing growth to 4% or even lower. That’s a standstill from China’s perspective.
In other words, China’s economy is likely headed for a hard landing soon if its government doesn’t take swift action.
“Our baseline forecast is for gradual policy easing, but there is a substantial risk for policy easing being delayed or insufficient,” the UBS report states.
Policy easing would likely mean lower cost of borrowing for domestic Chinese companies and or easier loan standards.
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Still, the news comes on the back of a sharp contraction in China’s steel production earlier this year, at the same time when the world’s other top steel producers were seeing growth in output.
It doesn’t augur well for China’s economy overall so investors in Chinese or Hong Kong stocks might want to be cautious for the immediate future.