China Real Estate Report Q3 2013 - New Market Report

The China real estate report examines the commercial office, retail, industrial and construction sectors in the country from the perspective that the market, which has experienced exponential growth over recent years, is starting to succumb to the impending conflagration of market weakness.

With a focus on the principal and second-tier cities of Shanghai, Beijing, Wuhan and Shenzhen, the report covers the rental market performance in terms of rates and yields over the past 24 months and examines how best to maximise returns in the commercial real estate market, while minimising investment risk and exploring the impact of wider economic concerns on a market that is losing balance. As prices are wavering from historic stability and curbing measures continue, particularly in major cities in China, the overriding sentiment in the country's commercial and residential real estate market is that a slowdown is under way, and our latest data collection from H212, while not demonstrating a resounding contraction, has seen several negative indicators come to light, particularly in the Industrial sector. Many developers are struggling with liquidity issues, and many more have estimated a decline in earnings for 2012. There are some bright spots on the horizon, however. The retail market is showing strength amid the uncertainty, and the office market remains buoyant in the country's top-tier cities.

Full Report Details at
- http://www.fastmr.com/prod/607124_china_real_estate_report_q3_2013.aspx?afid=301

Key Points:

* Construction: We maintain our forecast for 2013 of higher construction industry value growth year-onyear, based on the growth trajectory anticipated for the wider economy. We have however intervened in our 2013 forecasts to moderate infrastructure industry value growth and increase residential and nonresidential real growth, in line with trends we are expecting in the two sectors for 2013.
* Residential/Non-Residential: China's residential and non-residential sector was upwardly revised as the National Development and Reform Commission pushed for a fast-tracking of projects. Data from the national statistics for the fourth quarter shows a clear upturn in the residential and non residential segments, which we believe is going to continue throughout 2013. We have therefore revised our 2013 forecast to reflect a heavier weighting for residential and non-residential construction.
* Economy: Fears over China's shaky financial system, overvalued property market, and huge industrial overcapacity have been replaced by hopes that policymakers can engineer a recovery back above the 8% level. We maintain our view that the prospects for H113 look relatively bright. However, there may be some negative surprises in store as the year progresses as the recovery comes up against the country's structural hurdles. We are forecasting real GDP growth of 7.5% in 2013, versus the Bloomberg consensus of 8.1%.

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