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China's Real Estate Sector Contributes to The Country's Economy Amid Weak Exports and Economic Slowdown

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March 14
8:33 AM 2016

China's economic slowdown is still ongoing as exports tumbling the most in over six years, resulting in worse trade performance than expected. However, the country's property market is surging as the sector is heating up, leading analysts to name the real estate sector as the new economic driver. 

According to South China Morning Post, the real estate sector has emerged as the new economic driver meant to keep gross domestic product growth for China's economy from falling below 6.5 percent this year. The government is pushing its accommodative policy this year, expecting to renew property investment will help with the economic slowdown.

Driven by the government's support in the form of policies, China's property market has seen strong sales rebound, mostly in first-tier cities as well as some second-tier ones. According to MarketWatch, the surge in property shares led up to the Shanghai Composite Index by 1.5 percent. In the country, shares in the property sector were up 2.3 percent. 

Some big players in the property sector are also contributing to making the industry stronger. A plan disclosed by China's largest developer China Vanke Co. to buy assets in Shenzhen Metro Group led to an increase in property shares as the announcement boosted sentiment toward the sector. Recently, the country's largest state-backed conglomerate Citic announced that they will sell around 31 billion yuan worth of property projects to China Overseas Land % Investment. After the announcement, Citic shares jumped 9.2 percent, as well as China Overseas at 2.8 percent.

Barron's Asia listed that in the first two months this year, fixed asset investment grew 10.2 percent from a year ago, faster than the fourth quarter's growth of 8.9 percent, driven by the property market. It's a turn from last year's down trend in the real estate investment.

Other indicators in the property sector also revealed the sector's positive climate. The value of property sales grew by 43.6 percent in January and February, compared to 12.8 percent in Q4 last year. It also grew 28.2 percent in volume, compared to 2.8 percent in Q4. Land sales were also reversed to growth compared to last year's decline. Deutsche Bank economist Zhiwei Zhang is optimistic about the growth. "This suggests the momentum in property investment may continue at least in the next few months," Zhang noted.

Despite the prolonged decrease in China's exports, the real estate sector is still contributing to support the country's growth. Amid the economic slowdown, the Chinese government is prioritizing to support the property markets as it grows substantially as the country's new economic driver.

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