Property market set to cool further

Some have pointed to a rise in home sales and housing starts growth in August as evidence that China’s property sector is holding up well despite the government’s curbs. But while the property sector has not crashed this year, it has cooled significantly. Home sales accelerated in August to 4.3% y/y, but this was still the second-weakest pace of growth in 20 months. Housing starts increased 5.3% y/y last month, though only after growing at double-digit rates for most of the past year. Looking ahead, we think the sector will continue to cool. Mortgage lending looks set to slow further as monetary conditions remain tight. And local media report that the property curbs which have driven a sharp fall in sales in China’s largest cities in recent months are now being expanded to include other places too.