Barclays' forecast analysis on Real Estate has been released. It says that the attention should be shifted to China's real estate sector instead of the stock market.
A lot of businessmen and investors in China, both local and foreign, are said to be focusing on the plunge in the stock market recently. People at Barclays however suggest that they should pay very close attention to the real estate sector. This is based on Barclays' forecast analysis on Real Estate.
Bloomberg reports that a team of analysts from Barclays says that the real estate sector is what should gain more attention instead of the stock market. Spearheaded by Ajay Rajadhyaksha , the initial conclusion on Barclays' forecast analysis on Real Estate in China shows a possible collapse. The team expects to see a "sustained slowdown" in this particular sector in the years to come.
They point out that the China has invested so much in real estate for the past years that their investment/GDP ratio is already close to 50%. The difference in the growth ratio stemmed from a rate of more than 30% from the year 2000. This rate is said to be noticeably higher compared to Brazil and India. The ratio is still high even if compared to the United States of America which happens to be a developed country.
The team also presented a chart that showed the connection between real estate and other factors of the economy that contributes to the GDP. It showed that 50% of the steel used went to real estate whether directly or indirectly.
Although the Barclays' team of analyst says that the chances for an impending collapse are minimal it can be a sheer drop than expected. Barclays' forecast analysis on Real Estate as written by Business Insider shows that the demand for real estate is way below the supply. This is based on the 14 months of additional inventory for China's top 10 cities. Another reason is the trending of previous collapses from other countries like Spain and the US. The aforementioned countries experienced a huge collapse in its real estate division after having a GDP rate of 12.5% in 2006 and 6.5% respectively. The overall debt of China which comes close to 50% or $9.5 trillion is connected to real estate.
Statistics shown by Barclays that a possible collapse of China's real estate market is definite. However, it may happen at a very slow rate in years afterwards. This data will have to to make local and foreign investors alike to turn their attention to the real estate sector instead of worrying too much about the stock market.
