China home price growth cools in June, but investment quickens - GulfToday

China home price growth cools in June, but investment quickens


Residential buildings are seen in Beijing, China. Reuters/ File

Growth in China’s new home prices cooled in June as sales shrank for a second month, but building starts and investment quickened, providing a cushion for the slowing economy while Beijing claims some wins in reducing market froth.

Average new home prices in China’s 70 major cities grew 0.6 per cent in June from a month earlier, easing from a 0.7 per cent gain in May, according to Reuters calculations based on National Bureau of Statistics (NBS) data on Monday.

That marked the 50th straight month of price gains.

Most of the cities still reported higher prices. Sixty-three of the total 70 cities surveyed by the NBS reported higher prices in June, down from 67 cities in May.

On an annual basis, home prices increased 10.3 per cent in June, easing from 10.7 per cent in May.

The weakness mainly came from tier-1 cities. Prices in China’s four top-tier cities — Beijing, Shanghai, Guangzhou and Shenzhen — rose an average of 0.2 per cent from a month earlier, slowing from a 0.3 per cent uptick in May.

For tier-2 cities, which include most of larger provincial capitals, home prices grew 0.8 per cent in June, identical with the previous month’s advance.

Despite still elevated prices in some of China’s biggest cities, many analysts are still bearish on the market’s overall outlook this year as demand in smaller cities — which account for 70 per cent of sales by floor area — will likely falter, and as Beijing has not indicated it will ease nationwide property curbs anytime soon.

Property sales by floor area, a leading indicator of demand, fell 2.2 per cent in June on year, Reuters calculations showed although that was less than May’s 5.5 per cent fall, the biggest decline since October 2017.

“The main reason for price expectations to have turned more bearish is the intensive policy tightening in the past two months,” said Zhang Dawei, a property analyst at Centaline.

Beijing has repeatedly urged local governments to take more responsibility in curbing home price growth as China’s property markets have become increasingly polarised, with some cities showing signs of overheating while others are cooling rapidly.

Fears of bubble risk have resurfaced lately due to easier credit conditions as policymakers rushed to stimulate growth in the face of an escalating trade war with the United States.

In some provincial cities, including Nanjing and Hangzhou, local regulators have guided banks to raise interest rates on home loans in June, Chinese media have reported. Xian, a top price performer in May, also moved to step up purchase curbs to fend off speculative buying.

Homebuilders have also felt the pinch as Beijing tightened up financing channels.

The government slowed approvals for their onshore and offshore bond issuance to discourage feverish land bidding.

This was in line with declining growth in funds raised by property developers, which fell to 6.2 per cent on-year in January-June, lower than a 7.6 per cent increase in the first five months.

Despite cooling sales and prices, real estate investment, a major growth driver for the world’s second-largest economy, quickened in June.

It rose 10.1 per cent from a year earlier, accelerating from a 9.5 per cent gain in May but still slower than in April, Reuters calculated.

New construction starts measured by floor area also rose 8.9 per cent on year in June, versus a 4 per cent increase the previous month, reflecting still robust demand, Reuters calculations showed.

However, analysts say robust growth in property investment has been mainly due to aggressive land bidding by developers this year, while actual construction activity has slowed.

To fend off risks in economically more vulnerable small cities, Beijing also slashed its shantytown redevelopment target for 2019, which was responsible for significant frontloading of property demand in tier-3 and tier-4 cities in 2018.

Falling government support will inevitably drive down housing transactions and prices in these small cities, which will weigh on national-level sales and prices, Bo Zhuang, chief China economist at TS Lombard, said in a note last week.


Related articles