Morning Mumble: Chinese Property with wider implications (all of it was known but some things are missing).

Buy one, get free chickens – Chinese developers resort to gimmicks By Jamil Anderlini in Beijing

Showing the stress in the market; the figures were known, some of the news was recycled from previous months, but more importantly, there's discounts via Alibaba’s Taobao and associated sites including matching what you've spent over a certain period. Ignore the headline $325K potential as its unlikely 99% of the country will have spent anywhere near that on Baba. Albeit some savvy folk are advertising to process purchases for buyers to qualify for the maximum discount.

What the article misses is that banks are noticing a continued downturn in mortgage applications. Are the buyers not being motivated by the current prices? (Read as more discounts to come). Beijing has shown an increase in applications with a reduction in equity up front. Thanks to Li for contacting quite a few people in the banking sector to gain their views on the market. The liquidity may be available, but it looks like most are recycling more expensive loans for cheaper products (common-sense). 

Rental yields in 53 towns are under significant pressure (over supply) dropping to 3-4% which doesn't bode well for motivating the property investors. Li & friends have noticed that properties are dropping to around 3-4% yield. Property prices have to come down significantly to increase the potential yield to anything via. There's a $1m houses in Beijing for rent around $30K and they're far from rare...

A lovely cheery note for a Sunday, so with the dire impact and reduction in Sales, the belief China will have to create an overseas investment story (read as focus) to entice investors is becoming more likely. Go China Bulls!

When considering the impact on commodities if the Chinese construction industry is going to have to be excessively cost conscious all prices are going to come under pressure and mirror Iron Ore, Steel and Coking Coal and Oil, up next? Copper? Food ingredients including Palm Oil etc...?  Although Palm oil is under considerable pressure already but showing more value than the likes of sugar (sell).

Atb Fraser