Shanghai Property Sales Hit Five Year Low

Homes sales in Shanghai fell to a 5 year low last week as measures put in place to curb real estate speculation in China appear to be gaining traction. According to Bloomberg, (“Shanghai Home Sales to 5 Year Low”) sales of new homes from May 10 to May 16 fell 16 percent to 60,000 square meters from the week before, the lowest level for the same period since 2005. Despite the sharp fall in volumes, average home prices in Shanghai rose 21 percent to 24,833 yuan per square meter during the month. Price increases in Shanghai are exceeding the national average, which rose 12.8% in April as reported last week by China’s National Bureau of Statistics (see chart below).

While difficult to draw too many conclusions from one week’s worth of data, the sharp falloff in Shanghai property sales has certainly spooked the market, with the country’s main stock index down 21% year-to-date, over 25% from its peak in August 2009, and nearly 10% in May alone. Chinese property developers and commodity sensitive equities have been getting crushed as well.