China Developers Are Gloomiest in Almost a Decade, Survey Shows

(Bloomberg) -- China’s developers are at their gloomiest in eight years, adding risks to the world’s second-largest economy as it faces pressure from a potentially protracted trade war.

A sentiment index of the property market compiled by Standard Chartered Plc dropped to 38.5 in August, the lowest since it started in 2010. The readings are based on a semi-annual survey with 40 senior managers of property firms in nine cities, ranging from the metropolis of Shanghai to the little-known inland town of Huangshi in Hubei province.

Deteriorating financing conditions, housing purchase curbs and the looming property tax, which may hurt the long-term prospects of the sector, all contributed to the index’s decline, Standard Chartered economists Shen Lan and Ding Shuang said. China’s real estate sector has been the most robust pillar of investment this year as the economy slows; if it also falters, then that threatens the nation’s resilience at a time when the trade war with the U.S. is intensifying.

"Property investment will probably slow later this year, adding to downward pressure on the economy, " said Ding, the bank’s chief economist for Greater China and North Asia. "If this seriously threatens economic growth, policy makers will consider easing their grip. "

In the first seven months, the value of property sales in China jumped 14.4 percent from a year earlier while real estate development investment rose 10.2 percent.

Signs of the risks in the offing showed up elsewhere, too. Although Chinese developers reported impressive earnings this season, the firms’ ability to service their debt dropped to the weakest in three years, data compiled by Bloomberg show.

To contact Bloomberg News staff for this story: Xiaoqing Pi in Beijing at xpi1@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, Katrina Nicholas

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