China property

China new home price rises in November, alongside sales improvement

Shenzhen leads China new home price gains, at month-on-month pace of 27.7 pct in November

PUBLISHED : Tuesday, 15 December, 2015, 9:01am
UPDATED : Tuesday, 15 December, 2015, 9:00am

Nine out of the 10 major mainland Chinese cities tracked by the SCMP-Creda index saw a rise in new home price last month from October, and their combined sales volume picked up for the third month in a row.

The gainers were led by Shenzhen, where the average new home price surged 27.7 per cent month on month in November, after declining 4.7 per cent and 3.5 per cent in the previous two months.

Chengdu was the only city suffering a price drop last month of 0.5 per cent, after falling 3.22 per cent in October, due to heavy supplies.

The combined transaction volume in these 10 cities picked up 7 per cent in November from a month earlier to 14.6 million square metres, driven by a 36 per cent surge in Nanjing and a 32 per cent jump in Chengdu.

“Supply and demand will remain at high levels in December,” said Chen Sheng, dean of the China Real Estate Data Academy, partner of the South China Morning Post for the monthly index, covering prices and transactions in China’s 10 major cities.

They are outperformers in today’s real estate market, where a record high glut has worried policymakers as it can drag the country’s broader economy further down under 7 per cent.

The average new home price rose 15 per cent in Nanjing last month from October, and gained 11 per cent in Guangzhou. It increased 10 per cent in Beijing and 4.8 per cent in Shanghai.

Three cities suffered a decline in transaction volume of 10.5 per cent in Tianjin, 11.7 per cent in Chongqing and 1 per cent in Shanghai.

Shenzhen’s price surge last month came along with a 9.3 per cent improvement in transaction.

“Developers are increasing supply in their last ditch efforts to boost annual sales performance and sell down inventories,” Chen said. “Meanwhile, policies are unleashing upgrading demand.”

He said new home prices in Shanghai and Beijing are expected to rise further as land markets there are very hot, with parcels recently being auctioned at a cost near the asking price of neighbouring property projects for sale.

For example, mid-sized developer Longfor Properties last Thursday bought four adjacent parcels in Shanghai’s outskirt district of Jiading, at an aggregate price of 4.65 billion yuan, up 108 per cent from a minimum price set by the local government.

That means a floor space cost of 27,084 yuan per square metre, while new fully decorated apartments at two nearby projects are selling at an average price of about 29,000 yuan per square metre. Existing homes in the neighbourhood are being sold at around 20,000 yuan per square metre.

The auction attracted 10 bidders, including local state-owned giant Greenland Group, and Beijing-based Longfor won it narrowly.

Such a frenzy will compress developers’ profit margin and is adding to worries about risks in the housing market.