Saturday 19 August 2017

China home price recovery slows, as market struggles

An investor holds onto prayer beads as he watches a board showing stock prices at a brokerage office in Beijing. Photo: Reuters
An investor holds onto prayer beads as he watches a board showing stock prices at a brokerage office in Beijing. Photo: Reuters

Tara Fitzsimons

China's home-price recovery slowed in October, as a supply glut in less-prosperous cities challenges the authorities' efforts to revive the residential market with interest-rate cuts and easing of mortgage restrictions.

New-home prices increased in 27 cities, 12 fewer than in September, the National Bureau of Statistics said Wednesday.

Prices dropped in 33 cities, compared with 21 in September, and were unchanged in 10.

The number of unsold new homes nationwide increased 14pc to 437 million square meters (4.7 billion square feet) as of October 31 as the pace of home sales slowed, the statistics bureau said earlier this month. Chinese President Xi Jinping has vowed to "ease property inventory" after the government cut interest rates last month for the sixth time in a year.

"For second- and third-tier cities, which are not provincial capitals, and for smaller cities, price recoveries are still very weak," Wang Yi, a Shanghai-based analyst at Goldman Sachs Group Inc., said before the release. "Some of these cities may not see prices stabilizing till the end of this year or the middle of 2016."

The central bank on September 30 cut the mortgage down-payment requirement for first-time buyers in lower-tiered cities struggling with an oversupply of unsold homes by 5pcage points to 25pc.

Prices in the financial hub of Shanghai led gains in the first-tier cities, up 1.8pc from the previous month, the quickest pace in four months. Prices increased 1.2pc in the southern trading hub of Shenzhen, moderating from 4pc in September. They gained 0.6pc in Beijing and 0.8pc in Guangzhou, both slower than in the previous month.

The recovery in prices is more mixed in second-tier cities.

They advanced 1.3pc in the southern tourist city of Xiamen and 1pc in Nanjing, the fastest in more than two years.

They dropped in Wuxi, a manufacturing hub west of Shanghai, after rising for two consecutive months.

The price growth in both first- and second-tier cities "weakened" month-on-month, the statistics bureau said in a statement released with the data. Prices "started to fall" in the less-prosperous third-tier cities.

Prices in October rose in 48 cities from the previous month among the 100 tracked by SouFun Holdings Ltd., which owns China's biggest property website.

That was 11 fewer than in September. Average new-home prices rose 0.3pc in October from September when they climbed 0.28pc.

Housing sales gained 16pc in October from last year, the same pace as in September, though narrower than monthly growth of above 30pc in the May-to-August period, according to Bloomberg calculations based on official data released last week.

New-home building starts, a leading indicator of real estate investment, slumped 24pc last month from a year earlier, reversing a 17pc gain in September, according to government data. Property investment increased 2pc in the first 10 months from the same period last year, the slowest pace in more than five years.

"The only explanation of the poor new-starts figure is that sales in third- and fourth-tier cities are not smooth, while inventory pressure is enormous," said Beijing-based China International Capital analyst Ning Jingbian (Bloomberg)

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