Home price growth slows in China as sentiment turns bearish
- Residential sector records 43rd straight month of expansion in contrast to other parts of the economy
Growth in China’s new home prices slowed in November as domestic demand weakened though the sector remained resilient in contrast to a deeper slowdown in broader economic activity.
Average new home prices in China’s 70 major cities rose 0.9 per cent in November from a month earlier, slower than the previous month’s 1 per cent and the weakest since September, Reuters calculations based on an official survey showed on Saturday.
The data marks the 43rd straight month of price increases, Reuters calculations showed, a trend that continued despite curbs designed to rein in a near three-year real estate boom that has spread from megacities to the hinterland.
In a sign that the strength remains broad-based, 63 out of the 70 cities surveyed by the National Bureau of Statistics (NBS) reported monthly price increases for new homes, slightly lower than 65 in October.
Compared with a year earlier, new home prices rose 9.3 per cent, the fastest since July 2017 and quickening from October’s 8.6 per cent gain, according to NBS data.
China’s property market has remained relatively resilient as many investors exploit regulatory loopholes and turn to smaller cities where restrictions are lighter. Some speculators are also betting that many local governments, which rely on revenue from real estate, will be reluctant to tighten the regulatory screws too stringently.
In contrast, China’s November retail sales grew at their weakest pace since 2003 and industrial output rose the least in nearly three years as the economy lost momentum amid the trade war between China and the United States.
But sentiment in the property sector has also turned more bearish with a surge in failed land auctions as the economy slows and policymakers remain unwilling to loosen their control of the sector.
A Reuters poll this week showed property investment would slow to 4 per cent in 2019, while housing sales are expected to fall 5 per cent amid slowing economic activity and tough financing conditions for smaller developers.
Hong Kong property investors seek to lock-in gains as 20 per cent price drop spurs concerns on outlook
Economists were particularly concerned about a slump in China’s smaller markets where economic fundamentals are weaker, although some expect credit easing measures to prop up the sector.
China’s 35 tier-3 cities reported an average price increase of 0.9 per cent, slowing from 1.1 per cent in the previous month, while its 31 tier-2 cities – which comprise sizeable provincial capitals – saw a price increase of 1 per cent in October from a month earlier.
The northern city of Hohhot was the top performer, rising 2.9 per cent from October, NBS data showed.
While solid growth in the sector could cushion the impact of a long government crackdown on debt and simmering trade tensions, policymakers worry it could stoke fears of a sudden crash if prices climb too quickly given elevated levels of household debt.
Property investment in China picked up in November, a sharp contrast to other parts of the economy that have weakened.
However, recent soft home sales and land purchases suggest a dim outlook for the sector.
November sales by floor area were 5.1 per cent lower than a year earlier, according to Reuters calculations.
Household loans, mostly mortgages, increased to 656 billion yuan (US$95 billion) in November from 563.6 billion yuan in October, central bank data showed.