Price growth of China new homes slows further

Average increase weakens for second month to 11.1 per cent in February as tighter credit places pressure on developers to reduce housing costs

PUBLISHED : Tuesday, 18 March, 2014, 9:55am
UPDATED : Wednesday, 19 March, 2014, 5:07am

The mainland's housing price inflation eased last month for a second consecutive month as tighter credit weighed on home-buying sentiment and added to pressure on developers to cut prices before it is too late.

Average new home prices in 70 major cities rose 11.1 per cent year on year, easing from January's increase of 12.4 per cent, the National Bureau of Statistics said yesterday.

The latest data coincided with media reports that China Vanke, the mainland's biggest developer by revenue, priced a new project in Beijing lower than the market had expected, prompting speculation that price cuts that started in Hangzhou and Changzhou last month could spread to more developers in more cities.

It also followed reports on Monday that a privately held developer in Ningbo, a prosperous eastern city, had collapsed, with its largest shareholder detained.

"The property market will experience some kind of correction this year, particularly in the second half," said Lu Qilin, the head of research at Shanghai Deovolente Realty. "Slowing transactions, due to tighter bank lending, will strain developers' cash flow. Home prices at their current levels have also exceeded the reach of many buyers for self-use."

But Lu also said price trends could differ in different cities, or even in different areas of the same city this year.

Among the 70 cities surveyed by the bureau, new home prices rose fastest in Shanghai, up 18.7 per cent from February last year. It was followed by Shenzhen and Guangzhou, which both saw year-on-year growth of 15.9 per cent, and by Beijing with 15.5 per cent, it said.

China Vanke said in a statement yesterday: "The Beijing branch of China Vanke got an approved selling price of 21,680 yuan (HK$27,180 per square metre) for bare-shell apartments in its Orange City project, while the market has previously expected a price of 25,000 yuan with interior furnishings. Beijing Vanke will sell [the project] with strict adherence to government guidance."

The move came after repeated warnings from Vanke about short-term oversupply in many cities, with destocking likely to take more than 12 months.

"The negative result is that it is getting harder to sell homes," company president Yu Liang said earlier this month. "The positive side is that home price increases will ease and we don't have to worry about further tightening measures from the government."

The country's top leaders reaffirmed their commitment last week to establishing a system for the healthy, long-term development of the real estate industry, including the drafting of a property tax law this year and the establishment of a nationwide home-ownership database by 2020.

In the short term, the central authorities have said they have no plans to issue fresh nationwide tightening measures, and will instead let local officials decide whether they need to tighten or stimulate their housing markets.