China property investment growth continues to slow

Rate may stabilise as developers increase investment in response to interest rate cuts

PUBLISHED : Wednesday, 13 May, 2015, 9:28pm
UPDATED : Wednesday, 13 May, 2015, 9:28pm

The mainland's real estate investment growth continued to slow last month, but the rate may stabilise as developers said they would ramp up investment this year in response to interest rate cuts.

Property investment growth slowed to 6 per cent year on year in the first four months of the year, easing from 8.5 per cent in the first quarter, the National Bureau of Statistics said yesterday.

The floor area of property sold dropped 4.8 per cent in the first four months, narrowing from a 9.2 per cent decline in the first quarter, thanks to the relaxation of tax rules and easier down payment requirements on second homes introduced in March.

"We expect the strong sales to continue in the second quarter, with more cities implementing these new policies, together with continuing credit loosening," Nomura analyst Jeffrey Gao said.

Gao said he expected property sales to grow 5 per cent for the whole year, and housing prices to increase 10 per cent in the first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen.

Overall, the area of new housing starts fell 17.3 per cent in the first four months of the year, compared with an 18.4 per cent fall in the first quarter.

The People's Bank of China cut interest rates for the third time in six months on Sunday in a bid to lower companies' borrowing costs and re-energise a sputtering economy that is headed for its worst growth in 25 years.

Real estate investment, which directly affects about 40 other business sectors on the mainland, is considered to be a crucial driver of economic activity.

While the various policy relaxations will boost sales, rating agency Moody's Investors Service cautioned that developers' pricing power remained limited because market inventory was still high and developers with liquidity pressure would continue to run promotions to stimulate sales.

Prices of new homes in 100 cities fell 0.01 per cent from March to April, narrowing from a 0.15 per cent fall from February to March, said China Real Estate Index System, a consultancy linked to the mainland's largest property data provider, Soufun. The year-on-year decline last month was 4.46 per cent, compared with 4.35 per cent in March.

The mainland's CSI300 real estate sub-index closed 0.2 per cent lower after the data release, against a 1.21 per cent gain in the CSI300 index.