China home price growth slows

More mainland cities reported month-on-month falls in new home prices last month and the average pace of growth slowed, in what was the sixth consecutive month of rising prices.

Analysts had expected a stable outlook on the back of strong end-user demand and declining new starts, which would help support the mainland’s slowing economy.

The prices of new homes rose in 27 of the 70 cities tracked by the National Bureau of Statistics, compared with 39 in September, with first-tier cities leading the way.

Prices dropped in 33 cities, against 21 in September, and were unchanged in 10.

In the secondary market, 38 cities posted home price growth, against 39 in September, while 23 cities reported home price declines, up from 18 in September.

Compared to a month earlier, average home prices rose 0.2 per cent last month, down from September’s gain of 0.3 per cent, according to Reuters calculations based on NBS data.

But average home prices rose on an annualised basis for the first time in 14 months, reversing September’s 0.9 per cent drop, according to Reuters’ calculations.

Sixteen cities saw year-on-year price rises, against 12 in September, while 54 posted declines. The best performer remained Shenzhen, up 40.4 per cent year on year, while the worst performer was Zhanjiang, also in Guangdong province, which fell 6.5 per cent.

“It implies continued recovery. In a normal cycle, month-on-month change tends to lead year -on-year change. On a month-on-month basis, the average of the 70 city home price index swung to positive territory in May and has remained so ever since,” said Alan Jin, a property analyst at Mizuho Securities.

“We expect year-on-year growth may accelerate in the upcoming months.”

He said the decrease in the number of cities reporting month-on-month growth was partially due to seasonality as the market was cooling down as winter kicks in.

Shanghai topped the list in month-on-month terms, with prices of new homes growing 2.1 per cent. The pace of growth in the city continued to rise, up from 1.9 per cent in September and 1.6 per cent in August.

Beijing saw slower growth of 0.8 per cent, compared with 1.1 per cent in September and 1.3 per cent in August.

Shenzhen saw new home prices rise 1.2 per cent in October , against 4 per cent in September and 5.2 per cent in September.

David Hong, the head of research at consultancy China Real Estate Information Corp’s Hong Kong office, said he believed the market would perform steadily for the rest of the year.

With local governments required to report home price growth by the end of the year, they would not grant sale consent for any high-priced developments in order to maintain market stability, Hong said.

He said he expected prices in first- and second-tier cities would rise next year in the wake of falling new home starts.

Barclays said in a report last week that it continued to believe end-user housing demand would remain intact on the back of the government’s accommodative measures and declining mortgage loan rates.

New starts in the first 10 months declined by 13.9 per cent year on year, compared with a drop of 12.6 per cent in the first nine months of they year. In October alone, new starts fell 24.5 per cent year on year, according to Barclays.