China's real estate sector powered ahead in October, suggesting private sector investment is starting to contribute more significantly to an economic recovery led so far by government spending. Property sales and new construction surged, while investment in real estate rose 18.9 percent in the first 10 months from a year earlier, picking up from 17.7 percent in the first nine months, the National Bureau of Statistics reported on Tuesday.
Calculations show investment growth in October alone slowed to 28.4 percent from 37.0 percent in September and 34.6 percent in August. "Although property investment dipped a bit in October from the previous two months, growth is still very strong and the trend is expected to continue, given the figures for sales and new starts," said Xing Ziqiang, an economist at China International Capital Corp in Beijing.
Economists pay attention to the property data because real estate, which is dominated by private firms, accounts for more than 20 percent of fixed-asset investment, the main engine of China's growth in recent years. Property sales growth measured by floor space quickened to 48.4 percent in the first 10 months from 44.8 percent in the first three quarters.
That translates into an 81.7 percent surge in October alone, compared with a year earlier, up from 56.3 percent growth in September, according to CICC. And floor space started in the year to date rose from year-earlier levels in October for the first time since the beginning of 2009. The year-on-year increase in October was 56 percent, CICC calculated.
That matches September's reading, which was the strongest in at least five years. "I think sales and new construction starts are more important figures than investment because they are leading indicators," Xing said. With the sector showing broad-based strength, property prices in 70 cities rose 3.9 percent in October from a year earlier, up from 2.8 percent in the year to September. It was the fastest rate of property inflation since September 2008.
Compared with September, prices rose 0.7 percent in October, matching the previous month's gain, the statistics bureau said. The bureau's real estate climate index moved up to 102.03 in October, the third consecutive month that it has been above the boom-bust line of 100.