Is China's Stock Crash Spreading To Housing, Other Markets? 2 Analysts Discuss

Chinese equity indices have sold off more than 30 percent within a month, but what effect will this have on the Chinese housing market? Two Hong Kong-based analysts offered their take.

Yang Zhao, Nomura's Hong Kong based Asian economic analyst commented in a note on Friday that the wealth effect on Chinese household consumption will be "limited." Zhao noted that equity holdings account for a "small fraction" of Chinese household wealth, based on macro data. A 2011 study concluded that equities accounted for only 20 percent of household financial assets in China and this figure has risen to only 24 percent. In addition, there are about 109 million active equity accounts in China, representing "only" 8 percent of the total population. As such, less the analyst suggested that less than 20 percent of households have participated in the market, compared to an equivalent ratio of 53 percent in the U.S. "To sum up, we believe the equity market selloff is unlikely to trigger a sharp decline in China's household consumption," Zhao wrote. "We maintain our outlook that economic growth will pick up in the second half 2015, mainly driven by the cumulative effects of policy easing taken since last year."

Eva Lee is a Hong Kong-based real estate analyst for UBS and commented in a note that various press reports are stating that several buyers of real estate projects in Shenzhen have forfeited their deposits and cancelled their planned real estate purchases. Lee noted that the cancellations are likely a direct result of the "significant" stock market correction seen in China. In addition, other press reports are suggesting sellers in the secondary market are lowering their asking prices. However, the analyst suggested that these are "isolated events" but the stock market correction will affect buyers' sentiment and the purchasing power of "some" home buyers in top cities in the short-term.