China property

China’s home sales growth continues to slow in October as cooling measures take effect

  • Sales of new homes fell 1.3 per cent from a year earlier in October
PUBLISHED : Wednesday, 14 November, 2018, 3:46pm
UPDATED : Wednesday, 14 November, 2018, 11:01pm

China’s property sector is feeling the impact of measures to rein in prices.

Sales of new homes, measured by area, continued to decline. It fell 1.3 per cent in October from a year earlier, a bigger contraction than the 0.8 per cent seen in September, according to the Post’s calculation based on data released by the National Bureau of Statistics on Wednesday. Measured by value, it rose 9.9 per cent last month from a year earlier.

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Although home prices in 70 major Chinese cities for October will be released on Thursday, calculations comparing total national home sales value with area showed average home prices fell to 8,535 yuan per square metre in October, from 8,751 yuan in September.

New construction starts, a leading indicator of real estate investment, slumped to a one-year low of 14.7 per cent. It had peaked at 29.4 per cent in July.

Analysts say the softening data is in line with expectations that the growth rate will slow.

“The so called ‘golden September, silver October’ did not materialise,” said Yan Yuejin, an analyst with E-House China R&D Institute. “Going forward it may not be surprising to see more price cuts by developers to accelerate cash recovery.”

Real estate investment accounts for about one fifth of China’s fixed asset investment.

The sector’s sentiment, which contributes to a third of the overall economy, has cooled considerably since August after the Communist Party’s Politburo, China’s top governing body, said it would not allow home price to rise, a shift from its previous stance of curbing “excessive growth”.

The measures have continued to pile on since, including stringent requirements on the use of provident fund to buy homes in the biggest cities, dampening developers’ hopes for policy easing in the face of a cooling market.

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“Our survey showed that the sales condition in second and third tier cities is deteriorating and price cuts have appeared in some cities. A new consensus is emerging that there will be a big correction,” said Chen Shen, chief property analyst with China Securities Co.

According to S&P Global Ratings’ forecasts, China’s residential property prices have peaked and could fall by up to 5 per cent in 2019. This will cause residential contracted sales value to decline by between 8 to 12 per cent in 2019, but only 3 to 7 per cent lower in terms of volume, it added.

China International Capital Corp (CICC) said 2019 will be the “year of recession” for real estate, with sales expected to fall for the first time in five years.

Both CICC and CGS-CIMB Securities predict new home sales could slide by nearly 10 per cent.

Lu Wenxi, senior manager of research at Centaline Shanghai, too expects sales to slide as many cities were expected to maintain cooling measures well into 2019.

“Next year will be a bitter year. But the fall could also an opportunity for industry consolidation. After several years of ruthless expansion, it would not be a bad thing for the industry take a break,” he said.