China's housing market has clearly entered a downturn

China’s housing market has clearly entered a downturn, primarily because of a government push to slow rampant price growth in some of the nation’a largest cities.

That’s the view of Wei Li, China and Asia economist at the Commonwealth Bank, who says that data released on Tuesday suggests that market conditions are cooling.

“Besides sales (which fell from growth of 26% year-on-year (YoY) in October to 7.7% in November), housing investment and construction activity also slowed, to real growth rates of 5% YoY and -7.2% YoY in November respectively, from 11.6% and 7.5% in October,” he said following the release of today’s fixed asset investment report.

Li says that the slowdown in China’s housing market is in part policy-driven, reflecting more restrictive mortgage and purchase policy the government implemented since October.

Clearly those policies are working, as seen in this chart from CBA showing annual Chinese housing sales and construction growth rates going back to 2008.

While the property markets has now entered a downturn in his opinion, Li isn’t overly concerned, noting that a recent communique from China’s politburo suggests that policymakers intend to maintain a healthy and stable housing market in 2017, rather than planning to strictly tighten housing market conditions.

“We believe the downturn in China’s housing market should be moderate and well controlled,” he says.

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