China home price

China home price growth cools in June following curbs in smaller cities

PUBLISHED : Monday, 18 July, 2016, 2:13pm
UPDATED : Monday, 18 July, 2016, 11:22pm

Fewer Chinese cities reported gains in new home prices in June, amid an expansion of government curbs in second-tier cities designed to cool the market.

Prices of new homes last month rose in 55 of the 70 major cities tracked by the National Bureau of Statistics, down from 60 cities reporting gains in May. Prices fell in 10 cities, compared to only four that reported declines a month ago. Prices were unchanged in five cities in June, the bureau said.

“Overall the price growth is moderating,” said Liu Jianwei, a senior NBS statistician.

Home price growth in China’s first-tier cities, along with some second-tier cities, peaked in the first few months of the year, supported by government easing measures.

Second tier cities Nanjing and Suzhou imposed curbs to rein in overheated markets in the second quarter, following similar measures that were introduced to help cool surging prices in Shenzhen and Shanghai.

Most recently, the southern cities of Xiamen and Hefei, where homes prices surged about 30 per cent in the past 12 months, raised minimum down payment requirements for some homes.

Hefei, the provincial capital of Anhui, led the price gains in June, rising 4.9 per cent from the prior month.

“We would continue to see the government fine tune housing policies in second-tier and some satellite cities to clamp down on speculators,” said Eva Lee, property analyst at UBS.

Some Shenzhen state-owned banks also raised mortgage rates in July to further rein in the prices in this most expensive Chinese city.

“The overall market would cool down in the second half,” said Guo Yi, the marketing head at Beijing-based real estate agency Yahao.

In the big cities, price growth is moderating due to tighter home buying policies. Meanwhile, more small cities will see home prices decline as short term stimulus measures cannot sustain local demand amid the sluggish economy and oversupplied market, Yi said.

In June, the pace of price appreciation remained steady in large cities. In Beijing, new home prices rose 2.3 per cent, compared with a 2.4 per cent gain in May. In Shanghai, prices of new homes were up 2.4 per cent for the month, inching up from 2.3 per cent the month prior.

It has become more and more obvious that the government is again using the housing market to back Chinese growth
Iris Pang, Natixis Hong Kong

Falling house prices were mainly seen in third- and fourth- tier cities. The biggest fall was seen in Jinzhou, northern Liaoning province, with prices down 0.5 per cent in June, the 15th straight month of declines there.

Some experts are more optimistic about the sector. “We expect home prices would continue to rise in one city after another, most likely in second- and third- tier cities, ” said Iris Pang, a senior economist for Greater China at Natixis Hong Kong.

“It has become more and more obvious that the government is again using the housing market to back Chinese growth. We have observed that mortgage policies have eased in one city after another. When home prices in a city skyrocketed, the People’s Bank of China tightened mortgage rules in that specific city, then it relaxed mortgage policies in another city, and so on,” she explained.

But speedy nationwide growth would not likely happen again, she said, as mortgage rules are not relaxed for all cities at the same time now.

Driven by strong sales, economic output by the real estate sector in the first half surged 9 per cent from a year earlier, the fastest among all sectors. The nation’s gross domestic product growth was 6.7 per cent in the same period.