US home prices grew 3.5 times faster than China in second quarter as Evergrande crisis weighs on sentiment: Knight Frank

Name: Unpaid by Evergrande, supplier sells car and home to rescue his business
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Home prices in the US jumped 19.6 per cent in the second quarter compared to 5.6 per cent in China, according to a Knight Frank report

Halifax in Canada recorded the highest increase in prices of 30.8 per cent

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Residential buildings in Shanghai, China, where property price growth has slowed down due to various regulatory measures. Photo: Reuters

Lam Ka-sing

Published: 9:00pm, 5 Oct 2021Updated: 6:59am, 6 Oct 2021

Gains in US home prices outpaced those in China last quarter as the Federal Reserve persisted with its ultra-loose monetary policy while policymakers in Asia’s biggest economy embarked on several rounds of regulatory crackdown to cool the housing market, fanning a cash crunch at China Evergrande Group.

However, the divergence in home price growth between the US and China is expected to narrow in the coming quarters, analysts said.

On average, prices across 15 US cities surged by 19.6 per cent in three months through June 30 from a year earlier, compared to a 5.6 per cent increase across the same number of mainland Chinese cities, according to the Global Residential Cities Index compiled by Knight Frank. The gap has widened since the first quarter of 2020 when the price growth in China was 0.6 percentage point higher than in the US.

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Unpaid by Evergrande, supplier sells car and home to rescue his business

“The scale of the divergence in US and Chinese mainland house prices is significant,” according to a report led by Kate Everett-Allen, head of international residential research, noting that the Evergrande debacle has cast a shadow over the once surging urban house prices in China.

“Although the gravity of the situation only emerged in the third quarter there was evidence of a slowdown in price growth in the second quarter and sales activity has continued to slow in the third quarter,” she wrote in the report.

China’s property sector has come under intense scrutiny as the Communist Party marks its centenary and prepares to head into a crucial conclave process to select its next crop of leaders. Chinese President Xi Jinping, who declared that “homes were for living in and not for speculation”, recently emphasised that affordable housing was a key tenet of his pursuit of “common prosperity” in China.

China’s home prices grew at the slowest pace this year in August, as buying confidence took a hit from the government’s cooling measures. The debacle at China Evergrande Group, the world’s most indebted developer weighed by over US$300 billion of debt, has weighed on sentiment and housing prices.