It could be another year before China’s depressed property market stabilises, according to a new report from the New Zealand Ministry of Foreign Affairs and Trade (MFAT). The report reveals that investment in Chinese property fell more than 10.2% for the first half of last year, with the slowdown in construction significantly impacting NZ log exports.
China is New Zealand’s most important export market, with data published by Statistics New Zealand last year showing that more than 80% of radiata pines that left NZ were processed through Chinese ports – dwarfing South Korea, India, and Japan.
According to MFAT, the lack of consumer confidence and weak demand for logs for construction and timber making has hit NZ exports hard, with the Chinese government introducing stimulus packages in May and September to reduce unsold housing inventory, stimulate demand, and ensure that property developers had access to finance.
“Taken together, the support has been calibrated to stabilise property prices and ease the financial stress faced by developers, not to return the market to its previous heights,” the report said, with data for October nonetheless showing an improvement in housing sentiment.
“In October, home sales by value only fell 0.2% year on year compared to a 16.5% drop the month before,” MFAT said. “However, the overall picture remains challenging with both investment in real estate and number of new builds dropping by their fastest rate in October year on year.”
There is a growing consensus among commentators that prices should stabilise next year. “(And) while consumption does not look likely to rise markedly in the short term, economists see the low domestic demand to be cyclical, meaning consumption will recover,” MFAT said.”(However), for this to occur, economic sentiment needs to fundamentally brighten and very high savings rates moderate.”
New data reveals that China is taking fewer logs.
The new report comes as new data obtained by China Customs reveals that log imports contracted 8.8% (from 9,403.5 thousand cubic metres to 8,575.4 thousand cubic metres) year-on-year over the October-to-December quarter.
Of the logs imported, New Zealand radiata pine made up more than 51.4% (about 4,431.7 thousand cubic metres), a drop from 54% (or 5,077.3 thousand cubic metres) over the same period last year.
- To learn more about the Chinese export market, including it’s pivot from logs to lumber, click here for Wood Central’s exclusive report.