Strong brake on Chinese property investment: OCBC

But will it reach abysmal single-digit growth in 2012?

Not really, if China pulls off its huge public housing pipelines without a hitch, but the choke on property investment will be substantial.

Government-enacted cooling measures and a widespread developer cash crunch have already started to diminish investment in late 2011. OCBC expects a worsening effect this year.

What else is in store for the China property market and economy as a whole?

Here are snippets from an OCBC viewpoint:

Fixed investment grew 23.8% yoy in 2011, down slightly from the 24.5% yoy in January to November. Real estate investment slowed further to 27.9% yoy in 2011, down from the 29.9% growth pace in the first eleven months.

The decline in property investment was a result of tightening measures and the tight liquidity faced by developers; however the figure was far from concerns on China’s hard landing. We expect property investment to moderate further this year. Nevertheless it is quite unlikely for property investment growth to fall back to single digit growth given the support from China’s massive public housing projects.

External demand may remain the drag on China’s growth. External demand was the main drag on China’s growth in 2011 with net export weighing GDP growth down by about 0.55% points.

External demand is likely to remain weak this year amid rising global economic uncertainty. We expect annual export growth to slow from 20.9% yoy in 2011 to about 10-15% in 2012, while import growth may remain resilient around 15-20% in 2012. This may lead a further narrowing of the trade surplus.

Overall, we are still comfortable with our 8.5% call for China’s growth this year as China’s resilient domestic demand, coupled with ongoing public housing projects and increasing fiscal support to agriculture industry, is likely to provide a buffer to any negative shocks from weak global demand given China’s local government debt problem is still manageable.