"To us, it is no longer a question of ‘if’ but rather ‘how severe’ the property market correction will be," writes Nomura about a Chinese real estate market the firm thinks is already beginning to go south.
Nomura observes property investment growth turned negative in 4 of China's 26 provinces in Q1, with two northeastern provinces recording 25%+ drops. With the firm estimating housing and related industries account for 16% of China's GDP (others put the number as high as 25%), it expects a downturn will have a major macro impact.
China Real Estate Index System estimates property sales (by volume) fell 9% M/M and 19% Y/Y in 44 tracked cities. Average home prices still rose 9.1% Y/Y, but only 0.1% M/M.
Chinese online real estate plays SouFun (SFUN -5.6%), E-House (EJ -4.9%), and (E-House subsidiary) Leju (LEJU -4.3%) are all joining a broader selloff in momentum stocks. Leju is now just 2% above its $10 April IPO price.