China’s home price growth cools for the sixth month since October
Prices gains in smaller cities remain robust
Home price growth in China cooled in May, the sixth month since last October, when Beijing started to tighten the sizzling property market.
The data is the latest evidence that tougher market restrictions introduced by local governments since March continued to bite, especially in bigger cities. Sequential price growth have slowed every month except for February and March, when there was a brief uptick.
New home prices rose on a monthly basis in 56 of 70 cities tracked by the government, compared with 58 in April, the National Bureau of Statistics said on Monday.
There were prices gains in six of the 15 first- and second-tier cities closely monitored by the NBS, unchanged from April.
Shenzhen led the declines with a 0.6 per cent contraction in May compared with April, while prices in Hangzhou fell 0.3 per cent. Home prices in both Beijing and Shanghai were flat compared with the previous month.
In Beijing, which has seen the nation’s tightest property restrictions, prices of existing homes fell by 0.9 per cent, the first decline since February 2015. Transactions for existing homes account for four fifths of the city’s total sales and are more sensitive to market changes.
Numerous mainland cities have stepped up their curbs on home buying since late March, in many cases closing loopholes in existing restrictions. As many as 20 cities have imposed rules that require buyers of new homes to hold the properties for at least two years before resale.
However, the cooling prices seem to be limited to first and second-tier cities, whereas prices in most smaller cities remain robust. Bengbu, in central Anhui province, saw new home prices jump 3.4 per cent in a month, the biggest rally among all 70 cities tracked. Beihai, in southern Guangxi, saw prices advance 3.2 per cent.
“There appears to have been some ongoing price rotation and divergence cross regions: policy tightening effects were apparent in the 15 focus cities, along with slowing price momentum in some other cities which have seen notable price increases recently, while certain lower tier cities still registered solid price gains,” a J.P. Morgan note said.
Home sales volume also slowed. Residential property sales in terms of floor space rose 8.3 per cent year on year in May compared to a 14.3 per cent year on year gain for the January-May period, while growth in terms of value rose 12.6 per cent year on year in May compared to 18.6 per cent year on year from January-May, according to calculation’s by the Post based on NSB data.
“Overall, average prices growth still appeared to be resilient. Prices decline in tier-1 cities was offset by the continued price appreciation in lower tier cities. We expect tightening measures to be expanded to lower tier cities, where price appreciation has been strong, to help cool down the property market there,” Goldman Sachs noted.