The worst of China's property slowdown is behind us: Westpac

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Earlier today China’s NBS released new home sales prices for April. From a year earlier prices fell 6.1%, a figure that was unchanged from March.

While still weak Westpac’s Huw Mackay believes that “signs of healing broadened further in April” providing “further indication that the overall market has left the very worst
behind it”.

Here are a few excellent charts Makay supplies to back his call.

The first shows price developments across the 70 cities surveyed by the NBS.

While most saw prices fall from a month earlier, the number has rebounded sharply since the third quarter of 2014.

The second chart shows the annual price change for new home prices across major Chinese cities.

Although Shenzhen is the only city that recorded an increase in new home prices, all bar Chongqing saw the rates of decline moderate in April.

The recovery in large “first tier” cities is important as they tend to lead changes in smaller, regional cities. The third and final chart below demonstrates the relationship.

Based on the evidence in the April new home prices report, Makay suggests that house prices likely bottomed late last year.

“We retain the basis position that the market bottomed around September, but the recovery trajectory will be very timid, with sales unlikely to move sustainably into positive year-ended territory prior to Q3 with starts lagging behind”.

That’s perhaps the best outcome markets could ask for. A modest uplift in property prices, something that will only assist greater levels of consumption, while ensuring risks emanating from the property market remain in check.

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