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作者: 来源: 日期:2016-09-26 8:52:58

China’s economic fate rests on its housing market





China now commands the world’s attention, having transformed itself into an economic superpower that generates a startling one-third of global economic growth. In a growth-scarce world, the thought of losing even a smidgen of this is unsettling.



For this reason, it is of crucial important to track the constellation of vulnerabilities and unknowns that orbit China. Among these, the country’s housing market is a subject of disproportionate importance. This is due to its centrality, its sheer heft, and also its seeming vulnerability.



Housing acts as something of an economic fulcrum that exerts an outsized influence over China’s banks, heavy industries, builders and households. We figure it is directly or indirectly responsible for a whopping 19 per cent of China’s economic output.



To put this importance into context, a simple stress test finds that a 10 per cent drop in housing activity and home prices could subtract as many as 5 percentage points from China’s GDP. This is essentially the difference between growth and decline for the entire country.



So, having established its importance, is Chinese housing actually all that worrisome? Anecdotes and conjecture certainly tend toward the extreme negative end of the spectrum, with a focus on ghost cities, empty apartments and outrageous affordability.



But the reality is a bit more nuanced.



The main piece of bad news is that – by our estimate – 29 per cent of China’s urban dwellings are vacant (see chart). This is a very high fraction, well ahead of the US equivalent of just 13 per cent. It is a slight consolation that most of these have been sold (mainly to speculators), but the fact remains that they are empty. Were property investors to suddenly grow skittish, this could spell significant trouble.



Bringing China’s housing vacancy rate into line with the U.S. over the span of a decade would require an immediate 40 per cent reduction in the pace of construction.



A further concern is that Chinese residential investment constitutes a larger share of GDP than any other major nation today, and is larger than even Japan and South Korea managed during their own building booms.



However, this initial gloomy assessment does not provide a complete picture of China’s housing supply-demand dynamic.



From a flow perspective – setting aside those pesky vacancies for a moment – the country is actually underbuilding, if anything. Around 9m new homes per year are required to sate the appetite of urban population growth and to replace demolished properties. Meanwhile, China is currently building just under 7m new urban homes per year.



From a short-term perspective, the China’s housing market supply chain – starting with land acquisitions and progressing through new construction and completed construction before alighting on home sales – reveals a generally tame picture. Most of these indicators are slowing slightly, and the bulk are in fact running marginally behind sustainable demand rather than ahead of it.



On the price side of the ledger, home prices are rising at a robust but not extreme – by Chinese standards – rate of 9 per cent a year, and on a slightly decelerating trajectory. Nothing signals wild excess here.



From a long-term perspective, China’s vacancy rate quandary enjoys a powerful offset. China’s cities have far fewer occupied homes (181m) than there are households (269m). This housing mismatch is largely a function of poverty. As the country grows wealthier, the incidence of multiple families per dwelling should abate. To reach the US level of urban dwellings per household over the next decade – while simultaneously normalizing the high vacancy rate – would necessitate an immediate 31 per cent increase in residential construction per year.



To be clear, we stop short of predicting a coming housing boom in China. That seems a bit bold given the vagaries involved. But the point is that Chinese housing activity may not be quite as overcooked as it first looks.



Affordability tends to be the other source of hand-wringing on Chinese housing. Undeniably, the home price-to-income ratio of China’s largest cities is extreme and household leverage has now risen past U.S. levels. There is a real risk in both of these things. However, the intensity of concern diminishes somewhat when smaller cities and affordable housing projects are factored into the mix.



Similarly, Chinese households are better poised than most to sustain high home prices given their close to 40 per cent savings rate and the rapid clip at which their incomes rise over time.



Furthermore, there is more than one way to measure affordability. Providing a rather different perspective, the average Chinese household allocates a smaller share of their spending to dwelling costs than does the average American household. And the fraction of spending has been declining in recent years, rather than rising. Our own rough-hewn affordability estimate based on imputed mortgage payments has also been improving in recent years.



In a simpler world, Chinese housing would warrant a clear “thumbs up” or “thumbs down.” Alas, we live in a complicated world. Certain aspects of Chinese housing are quite worrying – its high vacancy rate and some affordability metrics. But other findings help to put these into context, and partially allay our concern. In the end, the Middle Kingdom’s housing market still warrants a place in our pantheon of risks, but in a location of slightly diminished prominence relative to our prior assumptions and arguably the view of the broader financial market.



Eric Lascelles is chief economist at RBC Global Asset Management.

埃里克•拉塞尔斯(Eric Lascelles)是加拿大皇家银行环球资产管理(RBC Global Asset Management)首席经济学家