China property

More mainland China cities see home prices up

PUBLISHED : Friday, 23 October, 2015, 8:18am
UPDATED : Monday, 09 November, 2015, 2:50pm

China’s home prices rose for the fifth consecutive month in September, led by first-tier cities with analysts expecting more lower tier cities to report positive home price growth in the coming months, backed by further rounds of stimulus measures by the government as a recovery in the housing sector will help the country’s sputtering economy.

Across 70 cities, China’s new home prices rose last month in 39 of the 70 cities from 31 the previous month, according to data released by the National Bureau of Statistics on Friday. They dropped in 21 of the cities and were unchanged in 10.

“We expect this trend to be maintained in the upcoming months, with more lower-tier cities to report positive home price growth,” said Alan Jin, property analyst at Mizuho Securities.

But to revive the country’s slowing economy, Jin said the importance is to see a full recovery in lower tier cities.

“The recovery of lower-tier cities is more important than tier-1 cities for stabilisation of the economy as they account (for) the bulk of total property investment in China,” said Jin.

Twelve cities rose compared with that a year ago. They dropped in 58 year-on-year. The best performer – Shenzhen – rose 38.3 per cent and the worst performer – Zhanjiang – lost 7.4 per cent year on year.

Shenzhen also topped the list with new home prices growing four per cent month-on-month, but the pace slowed from the growth of 5.2 per cent in August and 6.3 per cent in July.

Beijing saw smaller growth in new home prices with 1.1 per cent month-on-month, from August’s 1.3 per cent.

We expect this trend to be maintained in the upcoming months, with more lower-tier cities to report positive home price growth
Alan Jin, property analyst at Mizuho Securities

However, Shanghai’s new home prices were up 1.9 per cent, against August’s 1.6 per cent. New home prices in Guangzhou rose 1.4 per cent, versus August’s 0.9 per cent.

While first-tier cities continued to see prices go up, prices in many third tier cities dropped month-on-month, according to the bureau.

Average month-on-month growth of the 70 cities was 0.21 per cent in September, against 0.19 per cent in August, according to the calculation by Mizuho Securities on the basis of the data from the bureau.

Jin of Mizuho Securities expected the Central government would impose different policies for different tier cities going forward due to the uneven recovery in the respective markets.

“Tier one cities may see some tightening as recovery there was already strong enough. Majority of the rest of the cities would continue to receive supportive measures from the governments,” said Jin.

David Hong, head of research at property consultancy China Real Estate Information Corp’s Hong Kong office, said price growth was limited last month because the impact of the loosening policies on the real estate sector was weakening.

“The strong sales in the second quarter has absorbed a lot of pent-up demand, developers preferred to use prudent pricing strategies to attract demand,” said Hong.

The government started loosening policies, including cutting interest rates and lowering the amount of reserves banks must hold, to revive the property market since October 30 last year. In the latest move, the People’s Bank of China announced the relaxation of down payment ratios for first-time purchases on September 30 this year.