[I-bank focus]China property: mismatch, not bubble - MacQ

    Macquarie Research said a recurrent myth in the past decade is that China's housing sector is a bubble or is vastly overinvested.
  However, the research house said the real problem for the sector is the supply/demand mismatch, due to the current land system. That is, housing undersupply in cities with population inflows but oversupply in others.
  Macquarie said the difference between overinvestment versus mismatch is the single most important thing to keep in mind when thinking about China's property sector, as these two views have vastly different implications for investment and government policy.
  Macquarie said housing has become more, not less, affordable over time, but the market has also become increasingly polarized. Instead of thinking of the whole market as a big
liquidity bubble, it is more accurate to view it as a significant supply/demand mismatch.
  It said all previous down-cycles were driven by government policies, especially credit tightening and property curbs. Currently, credit easing has stalled, while more and more local governments are tightening. Also given the frontloading of demand Macquarie expects the sector to cool down in 1H 2017. As such, the rate-cutting cycle could resume around mid-2017 to support the economy.
  Macquarie does not think it is particularly risky at this moment, given current housing affordability, household leverage, the down-payment ratio (30% until September 2015) and
policy tools that could be used by the government.