Developers may feel the chill this winter

For the real estate sector, property investment was better than expected, and land purchase and property development funding all improved in the first half of this year. So what happened to the tightening policy for the property sector? And what could be the market trend in the second half? Our (Standard Chartered China's) survey in mid-2017 provides some clues.

Our survey shows brisk construction activities in the first half, in line with the official data on real estate investment growth which held up at 8.5 percent year-on-year in the first half. The reason for that was mainly the declining inventory, and developers' needs to increase sales revenues and intention to front-load current projects to avoid deteriorating market conditions in the future. But the outlook on construction activities in the second half is cautious, because sales are likely to weaken and tighter credit financing have generated headwinds for investment growth.

Land market dynamics hold another key. The survey found most developers plan to purchase land-use rights to boost their land reserves and facilitate future expansion. Therefore, we don't expect the resilient growth in land purchase - 8.8 percent year-on-year as of June in nationwide data - to translate into an immediate increase in newly started construction. We also found that developers were generally cash rich and their favourable cash positions might have acted as a buffer to avoid a sharp slowdown in property investment despite weaker sales.