This Statistical Flaw Makes the Chinese Real Estate Market Look Better Than It Really Is

June 10, 2015 5:11 pm Last Updated: December 31, 2015 3:35 pm

Chinese real estate is at the epicenter of the economy and prices have been falling. Or rising, depending on how you look at it.

Compared to April 2014, it is still in free fall. Compared to March this year, it was flat. International think tank Stratfor thinks analysts shouldn’t be blinded by the details.

“Despite the positive signs in the housing sector, China is not out of hot water yet. An increase in home prices and sales in the coming months will be restricted to a handful of the 70 cities for which China publishes monthly data,” Stratfor wrote in a note.

It said that these cities represent the best of the bunch, being major capitals of provinces and industrial hubs. As for the rest, the picture is even bleaker than the small improvement the 70 cities experienced in April compared to March.

 “It is safe to say that these 70 cities represent the healthier property markets nationwide. In short, whatever the headlines may say in the coming months, China’s property markets, especially in the interior and the inland regions of coastal provinces, are likely to be far less positive,” the analysts wrote.

Because real estate is so important the Stratfor analysts think China’s economy is slowing more than the official statistics show.

For example, “In the first three months of 2015, rail freight transport volumes fell 9 percent year on year.” Other indicators such as power consumption are also growing at very low rates, much lower than the 7 percent economic target. This is why other experts like Diana Choyleva of Lombard Street Research calculated negative quarter-on-quarter growth at the beginning of 2015.