Why Shanghai offers hope for China’s ailing real estate market

Albert Edwards, head of global strategy at Societe Generale, is renowned for his bearish views on the global economy and stock markets. Weak domestic demand in China is grist to his mill. In a report on August 25, Edwards said the collapse in China’s credit impulse – the change in credit growth as a percentage of economic output – was the most underappreciated trend in global markets right now.

Edwards singled out recent data on China’s housing market which Societe Generale analysts described as “hopeless”. It is true that the five-year market downturn has shown little sign of easing. Home sales by value in 70 cities contracted 13.2 per cent in annualised terms in the first half of this year while property investment plunged 19.2 per cent. As Nomura noted, “national property indicators have broadly worsened in recent months”.

However, there are pockets of resilience in first-tier cities. Nowhere is this more apparent than in Shanghai. According to data from the National Bureau of Statistics, prices of new homes rose on a monthly basis for 12 of the last 13 months, the longest growth streak among first-tier cities.