The Chinese real estate market has hit a downturn – of that there can be no doubt.
The signs of a downturn in the market are everywhere. Whether it is increased government regulation, a slowing in the rate of foreign money entering the Chinese real estate market or the fact that leading real estate developers in the country have had to lay off staff and close offices, any analyst worth their salt and quite a few that aren't would quite easily be able to notice the real estate slump that has hit China in recent months.
Actually, though, virtually every analyst also expected this to happen. The combination of regulatory measures by the Chinese government that were designed to do exactly this and the cardinal rule of economic theory that the price of a commodity (in this case, property) can not increase ad infinitum would have signalled the future to almost anyone.
However, mixed signals are the flavour of the day for the Chinese economy, because while property sector looks down, the tourism sector is looking up.
The revenues for the Chinese government from tourism in 2008 are projected to reach CHY 1.2 trillion, which would represent a significant increase from the revenues of just under CHY 1.1 trillion that the country was able to hit last year. This shows that foreign money is still making its way into the Chinese economy, albeit through a sector that is related to property rather than actually being property.
What this ultimately means, though, is that mixed messages are being sent to property investors who are interested in the Chinese real estate market. While the market is certainly down at the moment, the question that needs to be answered is whether it will rebound and whether it will do so soon enough to make property investment in the country worthwhile.
One of the things that can help in a property rebound is a strong tourism industry. That creates additional demand for property, and this is part of the reason so many investors are focused on the tourism numbers in China.
