Markets
China’s Real Estate Crisis, Shown in Two Charts
See this visualization first on the Voronoi app.
Visualizing China’s Real Estate Boom and Crisis
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Evergrande—once China’s largest real estate developer—was forced to liquidate on January 28th. It was yet another strike against the country’s now fledgling real estate market, adding to a growing list of China’s economic worries.
In the charts above we show two annual metrics related to China’s real estate crisis from 2003 to 2023. The first looks at apartment and commercial property sales using Burreau of Statistics data from Bloomberg, and the second examines new housing starts using data from the World Bank.
Things to Know About China’s Property Slump
Property sales by value in China climbed pretty steadily from less than ¥1 trillion RMB in 2003 to over ¥15 trillion in 2021, but have since dropped to under ¥12 trillion in 2023.
This was the case across both residential and commercial sales. In China’s residential market specifically, new home sales dropped 6% in 2023, with secondhand home prices declining in major cities.
And on the development side, new residential developments have fallen 58% from 1,515 million m² in 2019 to 637 million m² in 2023.
| Year | New Residential Building Developments (million sq meters) |
|---|---|
| 2023 | 637.4 |
| 2022 | 817.3 |
| 2021 | 1,350.2 |
| 2020 | 1,473.4 |
| 2019 | 1,514.5 |
| 2018 | 1,385.4 |
| 2017 | 1,160.9 |
| 2016 | 1,047.8 |
| 2015 | 970.8 |
| 2014 | 1,146.4 |
| 2013 | 1,318.5 |
| 2012 | 1,199.1 |
| 2011 | 1,349.4 |
| 2010 | 1,147.2 |
| 2009 | 784.9 |
| 2008 | 695.4 |
| 2007 | 662.3 |
| 2006 | 531.8 |
| 2005 | 446.5 |
| 2004 | 390.0 |
| 2003 | 352.4 |
| 2002 | 276.5 |
Here are a few more things to know about the ongoing real estate crisis in China:
- Developer Defaults: Real estate firms faced $125 billion in bond defaults between 2020 and 2023.
- Economic Impact: The property sector’s slump has dragged down China’s economy, leading to layoffs and financial instability.
- Getting Creative: Municipalities, many of which rely on land sales as a key source of income, have been introducing “old-for-new” support measures meant to stimulate new home purchases.
Experts predict a prolonged downturn, with many people souring on Chinese investments, but exactly how things will develop after Evergrande’s collapse is unclear.
Markets
The European Stock Market: Attractive Valuations Offer Opportunities
On average, the European stock market has valuations that are nearly 50% lower than U.S. valuations. But how can you access the market?
European Stock Market: Attractive Valuations Offer Opportunities
Europe is known for some established brands, from L’Oréal to Louis Vuitton. However, the European stock market offers additional opportunities that may be lesser known.
The above infographic, sponsored by STOXX, outlines why investors may want to consider European stocks.
Attractive Valuations
Compared to most North American and Asian markets, European stocks offer lower or comparable valuations.
| Index | Price-to-Earnings Ratio | Price-to-Book Ratio |
|---|---|---|
| EURO STOXX 50 | 14.9 | 2.2 |
| STOXX Europe 600 | 14.4 | 2 |
| U.S. | 25.9 | 4.7 |
| Canada | 16.1 | 1.8 |
| Japan | 15.4 | 1.6 |
| Asia Pacific ex. China | 17.1 | 1.8 |
Data as of February 29, 2024. See graphic for full index names. Ratios based on trailing 12 month financials. The price to earnings ratio excludes companies with negative earnings.
On average, European valuations are nearly 50% lower than U.S. valuations, potentially offering an affordable entry point for investors.
Research also shows that lower price ratios have historically led to higher long-term returns.
Market Movements Not Closely Connected
Over the last decade, the European stock market had low-to-moderate correlation with North American and Asian equities.
The below chart shows correlations from February 2014 to February 2024. A value closer to zero indicates low correlation, while a value of one would indicate that two regions are moving in perfect unison.
| EURO STOXX 50 | STOXX EUROPE 600 | U.S. | Canada | Japan | Asia Pacific ex. China |
|
|---|---|---|---|---|---|---|
| EURO STOXX 50 | 1.00 | 0.97 | 0.55 | 0.67 | 0.24 | 0.43 |
| STOXX EUROPE 600 | 1.00 | 0.56 | 0.71 | 0.28 | 0.48 | |
| U.S. | 1.00 | 0.73 | 0.12 | 0.25 | ||
| Canada | 1.00 | 0.22 | 0.40 | |||
| Japan | 1.00 | 0.88 | ||||
| Asia Pacific ex. China | 1.00 |
Data is based on daily USD returns.
European equities had relatively independent market movements from North American and Asian markets. One contributing factor could be the differing sector weights in each market. For instance, technology makes up a quarter of the U.S. market, but health care and industrials dominate the broader European market.
Ultimately, European equities can enhance portfolio diversification and have the potential to mitigate risk for investors.
Tracking the Market
For investors interested in European equities, STOXX offers a variety of flagship indices:
| Index | Description | Market Cap |
|---|---|---|
| STOXX Europe 600 | Pan-regional, broad market | €10.5T |
| STOXX Developed Europe | Pan-regional, broad-market | €9.9T |
| STOXX Europe 600 ESG-X | Pan-regional, broad market, sustainability focus | €9.7T |
| STOXX Europe 50 | Pan-regional, blue-chip | €5.1T |
| EURO STOXX 50 | Eurozone, blue-chip | €3.5T |
Data is as of February 29, 2024. Market cap is free float, which represents the shares that are readily available for public trading on stock exchanges.
The EURO STOXX 50 tracks the Eurozone’s biggest and most traded companies. It also underlies one of the world’s largest ranges of ETFs and mutual funds. As of November 2023, there were €27.3 billion in ETFs and €23.5B in mutual fund assets under management tracking the index.
“For the past 25 years, the EURO STOXX 50 has served as an accurate, reliable and tradable representation of the Eurozone equity market.”
— Axel Lomholt, General Manager at STOXX
Partnering with STOXX to Track the European Stock Market
Are you interested in European equities? STOXX can be a valuable partner:
- Comprehensive, liquid and investable ecosystem
- European heritage, global reach
- Highly sophisticated customization capabilities
- Open architecture approach to using data
- Close partnerships with clients
- Part of ISS STOXX and Deutsche Börse Group
With a full suite of indices, STOXX can help you benchmark against the European stock market.
Learn how STOXX’s European indices offer liquid and effective market access.
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