China’s housing market, sometimes called the world’s ‘most important’ sector in terms of global economic impact, is in flux again, with housing and construction picking up recently, following an earlier recovery in housing sales. However, we are skeptical whether construction will show a significant, sustained recovery as inventories of unsold housing are still too high.

The uptick in construction has helped overall growth in China to bottom out in early 2016 and been a key driver of the recent recovery in international raw commodity prices and commodity-related asset prices such as currencies of commodity-exporting countries.

However, in our view the uptick in construction is premature and we are skeptical whether it can be sustained. While inventories of unsold housing have eased somewhat they are still too high and need to come down more.

Such inventories are low in tier-one cities, where the demand-supply situation has remained fairly tight because of healthy demand, the maintenance of relatively strict restrictions on house purchases and the relatively disciplined behavior of property developers.

However, nowadays 95 percent of nationwide real estate sales are outside of tier-one cities. Thus the biggest cities do not matter much, macro-wise. Rather, tier-two to tier four cities are the key drivers of national property construction.

In the smaller cities, with less well-disciplined developers and weaker demand, inventories of unsold housing have not fallen enough. Indeed, while housing prices have been rising strongly in tier-one cities since early 2015, they have only recently started to increase again month-on-month in tier-three cities.

Thus, while the short-term pick-up in property construction is for real, we do not think that it will translate into a sustained recovery until housing sales have been growing healthily for a prolonged period and inventories of unsold housing have come down more significantly. And even then the recovery in construction is unlikely to turn into the kind of boom that China has seen in the past, given current trends on urbanization and investment behavior.

The current housing construction pick-up supported overall GDP growth in first quarter and should do so in (at least the start of) second quarter. However, we think it is likely that the property construction cycle will ease again and that the government will need to continue to rely on other drivers, including infrastructure investment, to meet its ambitious growth target of 6.5-7 percent for 2016.

Global markets for industrial metals and minerals may be in for a disappointment once this real estate pick-up fades.

The author is head of Asia economics at Oxford Economics.