China's Property Market Faces Long Decline Despite Temporary Government Support

Property sales and starts have collapsed in China, but construction activity has held up due to government support. This is not sustainable long-term.

Capital Economics estimates that a sustainable level of residential construction is only about half of current levels. There is still a long way to fall.

Infrastructure investment by local governments has helped support construction activity so far. But this has diminishing returns.

For the first time since 1997, reported residential completions outpaced starts last year due to government pressure. But data is opaque.

Property weakness will drag on China's GDP growth this decade. Demographic and urbanization challenges suggest structurally weaker demand ahead.