Quick Data Update: Rebound in house prices, as sales grow over 16% on the year.

On the front end, China's property market continues to improve.  Monthly prices rose 0.60% in May, based upon my GDP-weighted 70 city index.  The rebounding house price numbers follow a May housing sales increase of 16.4% from last year.  All-in-all, solid housing data in May.

Given the high estimates of unused inventory, it is difficult to know whether a rebound in the housing market can be sustained for an extended period of time.  But for now, PBOC easing, the roll-back of mortgage restrictions, and the extreme relative housing price declines (disposable income is up over 8.5% and housing prices are down 3.2% over the last year) have given a boost to the market.

Weak construction continues to be a drag on growth.  New housing starts are down over 12% from last year.  But, I estimate that sales increases lead new starts by 6 months (see my posting "Some housing data the only good data in April's ugly economic release." ).  That would put a construction rebound sometime in the Fall.  Key commodities will see a surge in demand by the Fall as construction ramps up again after a long decline.

The first and second tier cities along the coast are leading price gains.  These cities have significantly larger economies than central and western cities.  So, the economic impact from these cities seeing a housing rebound will add more to growth than the central and western city property markets can detract.  Here is the 70 city property price index visualized in a map: