Chinese home price growth slows as cooling measures take effect
The growth in China’s home prices slowed dramatically in October after a recent round of property tightening measures dampened demand, according to official data.
New home prices in the mainland’s first-tier cities increased by just 0.5 per cent from the previous month, a sharp decline from the 3.7 per cent month-on-month growth in September, the National Bureau of Statistics (NBS) said on Friday.
The cost of new homes in second-tier cities grew 1.3 month-on-month, down from 2.3 per cent in September.
Price gains in Beijing fell sharply from 4.9 per cent in September to 0.6 per cent in October, while growth in Shanghai slowed to 0.5 per cent from 3.2 per cent in September.
Twenty-two local governments rolled out a raft of tougher curbs on home-buying during the National Day week-long holiday in a bid to arrest runaway property prices and avoid a potential market bubble. Wuhan and Chengdu this week stepped up their restrictions on qualified home buyers.
China’s banking regulator has told banks to review their mortgage lending and property development
loans after China Minsheng Banking Corp suspended approvals of some non-standard mortgages in Shanghai.
China’s housing ministry has stepped up oversight of rogue players since early October, investigating developers and agents for alleged false advertising, urging probes on “illegal” sales and cracking down on investment by online finance and peer-to-peer lenders. Proceeds raised from the debt capital market are prohibited from being used to acquire land.
To demonstrate the effects of the cooling measures, the NBS provided a detailed breakdown of price movements for the first and second half of October for 15 cities that had imposed restrictions. The data showed price cooling was more pronounced in the second half of the month.
Seven out of the 15 cities, including Beijing, Shanghai and Shenzhen, saw prices slip further in the second half of last month.
Home sale also cooled. National home sales in October rose 38 per cent year-on-year in value terms, according to earlier NBS data. That compared to a 61 per cent surge in the previous month.
Though the tightening has yielded initial effects, in the Friday Caijing annual forum, it drew heavy criticism from economists and industry insiders. Zhong Bin, secretary-general of China Real Estate Chamber of Commerce, said that to stem price rises China should tackle the root causes, such as local governments’ heavy reliance on land sale revenue, the lack of property tax, and the government’s monopoly on land sale rights.
“Without fundamental reforms in financial, fiscal and land fronts, the so called ‘policy adjustment’ would repeat its tight-and-loose cycle,” he said.
Zhu Haibin, chief China economist with J.P.Morgan Chase, said the current land allocation system favoured small and medium-sized cities while curbing land supply in the biggest cities. This has gone against the actual direction of population flow. Tight supply and surging home prices won’t change in first-tier cities unless the system was changed, Zhu said.