Weak mainland property market bodes ill for economy

The mainland property market has seen its worst-ever first-half performance, latest official data shows, stoking concerns about the sector and the economy in the second half.

Property sales fell 6.7 per cent in the first six months from a year earlier to 3.1 trillion yuan (HK$3.8 trillion), the National Bureau of Statistics announced yesterday. The drop was steeper than the 5.2 per cent decline in the first half of 2012, when the market was in the midst of a downturn.

"The property market is the biggest risk to the broader economy in the second half," said Shen Jianguang, the chief China economist at Mizuho Securities. "Sentiment has not improved as developers are yet to cut prices substantially."

Shen said the relaxation of curbs on home purchases and residency registration policies in more cities had not brought back buyers.

As sales slowed, inventories rose 10 million square metres from the previous month to 544 million square metres at the end of last month. The inventory was also higher than the sales of 484 million square metres in the first half.

Edison Bian, the research head of China property at UOB Kay Hian, said he expected major developers to post weaker earnings and higher net gearing ratios in their interim reports next month.

Real estate investment rose 14.1 per cent in the first half from a year earlier to 4.2 trillion yuan, slightly slower than the 14.7 per cent rise in the first five months, the statistics bureau said.

Developers raised 5.9 trillion yuan in the first half, up 3 per cent from a year earlier. About 1.1 trillion yuan was in development loans, an increase of 14.1 per cent. However, mortgage loans fell 3.7 per cent to 651 billion yuan.

As the downturn deepens, developers are cutting back on new land purchases and slowing new projects. Official data shows they bought 148 million square metres of land in the first half, down 5.8 per cent from a year earlier.

But the premiums they paid rose 9 per cent to 403 billion yuan, indicating land prices are still on the rise.

Langi Chiang