Property gloom spreads on mainland

A record number of mainland cities saw a drop in new-home prices last month as Beijing continued to curb speculation in the property market.

Forty-six out of 70 monitored cities posted a year-on-year decline in prices in April amid the tightening measures.

In March, there were only 38 cities that saw prices for new homes decline compared against a year ago, according to data released by the National Bureau of Statistics yesterday.

Prices for new flats grew at no more than 1.7 per cent in 23 cities, and one city saw prices in the primary market remain unchanged.

'[The data] shows further price correction in the property market, although signs of stabilisation in the pace of the decline appear to be visible across major cities,' Barclays' analysts said in a report.

Wenzhou suffered the steepest fall in new home prices, down 12.3 per cent in April from a year earlier. The city also saw the steepest month-on-month drop, declining 2.6 per cent.

In Beijing, prices fell 1 per cent last month, while in Shanghai they dropped 1.3 per cent from a year ago. In Guangzhou and Shenzhen, prices of new homes went down by 1.2 per cent and 1.6 per cent respectively.

In the secondary-homes market, 56 cities posted a decline in prices last month over the previous year, seven cities more than in March. There were 12 cities that saw price growth of up to 3.2 per cent. The figures came a day after the nation's housing ministry pledged to continue its suppression of speculation in the housing market, and help people buy homes.

Barclays' analysts said the mainland's property market had been correcting in an orderly manner. With developers more willing to cut prices and the government encouraging first-time home buyers, sales had seen recoveries since March, it said.

'We continue to expect another 5 to 10 per cent average price decline from now to year-end, which should help to sustain sales and reduce inventories,' the analysts said. 'We believe the probability of a disorderly price adjustment or a major change in the government's property tightening policy this year remains very small.'

Alan Chiang Sheung-lai, head of residential property in greater China for property consultancy DTZ, said price adjustments could widen due to downside factors such as abundant supply and hesitant buyers.

'About two to three months ago, the market started to realise the need to lower flat prices and developers are more willing to offer discounts,' he said.

'There is an abundant supply of new flats, particularly in tier-two, tier-three and tier-four cities, while home-seekers who intend to upgrade their holdings are either tied up by home purchase restrictions or they tend to wait as the downside risk of property prices is high.'

The People's Bank of China has lowered banks' reserve requirement ratio by half a percentage point, and the change took effect yesterday.

But Chiang doubted whether the move to free up capital would benefit home buyers.

12.3%

Prices for new homes fell this much in Wenzhou in April from a year ago, the steepest decline among the 70 monitored cities