Home prices tumble for another month on mainland

PUBLISHED : Monday, 19 December, 2011, 12:00am
UPDATED : Monday, 19 December, 2011, 12:00am


Home prices on the mainland continued to fall last month, but analysts said it was too early to judge whether the downward correction would be sustained and expected government restrictions on purchases to remain.

Prices declined last month in 49 of the 70 large and medium-sized cities tracked by the government, the National Bureau of Statistics said. That is up from declines in 34 reporting areas in October an 14 that saw price declines in the third quarter.

The secondary market also headed lower, with 51 cities witnessing price declines, up from 38 in October and 22 to 26 in the third quarter.

Year on year, prices were down in only four cities last month for new homes, compared to 21 cities that reported year-on-year price falls for existing homes, the bureau said. The four cities included Wenzhou, whose entrepreneurs are notorious for speculating on properties, and where November's average sales price for new homes was down 5.2 per cent on the same month last year.

Prices in Haikou in Hainan province, Nanchong in Sichuan province, and Ningbo in Jiangsu province, were less than 1 per cent lower year on year.

'I don't think restrictive policy will change in the short term since Beijing said after last week's Central Economic Work Conference that it will continue to regulate property prices next year,' said UBS economist Wang Tao. 'The price decline has just started. By next year over half the cities will see year-on-year declines.'

Wang said it was difficult to predict with certainty when Beijing might relax restrictive policies, though he believed it might do so earlier if the international economic environment worsens, or if government-subsidised construction of low-cost housing progresses more slowly than expected.

For the past 18 months or so, Beijing has reduced the amount of money that banks can lend on mortgage loans, restricted people from buying more than two homes and raised mortgage interest rates and down-payment requirements to rein in price increases.

The measures have seen sales volumes fall by half in major cities from a year earlier, hurting developers' profits and cash flows and prompting some to cut prices of new homes by up to 20 per cent.

Home prices in 100 major mainland cities fell last month for the third consecutive month, according to China Real Estate Index System.

'Eventually cash-flow problems will force developers to make further price cuts in order to attract buyers,' CCB International, the brokerage arm of China Construction Bank, said in a research report. It said if prices in Beijing and Shanghai fell by another 10 per cent next year, they should be at 'healthy levels' relative to people's income.

Earlier this month the nation's central bank, the People's Bank of China, lowered the reserve-requirement ratio - the proportion of funds lenders must hold in reserve and not lend out - by 50 basis points, a move expected to free 400 billion yuan (HK$486 billion) for lending.