China’s new home sales growth in July drops to slowest pace in two years

China’s residential sales growth in July fell to its slowest pace in more than two years, echoed by a similar slowdown in contracted monthly sales for the country’s largest developers.

The value of new homes sold rose 4.26 per cent year on year to 779 billion yuan (US$117 billion) in July, down from 26.4 per cent in June, the slowest pace in more than two years, according calculations by the South China Morning Post based on data released Monday by the National Bureau of Statistics (NBS).

In terms of floor space, the slide in growth rate was even steeper, from 18.4 per cent year-on-year in June to 2.58 per cent in July.

The deceleration was in line with a slowdown in property investment growth, from 7.9 per cent in June to 4.8 last month, according to Post calculations based on NBS data, which is only available on a year-to-date basis.

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The NBS didn’t provide any explanation for the slower growth, but analysts said government property curbs alone were not enough to account for the drop. While the curbs were in place in June, sales staged a strong rebound that month as developers competed with each other to promote new projects and were more willing to offer discounts ahead of the mid-year point. Entering July, developers saw less urgency to do so, and new home supply fell.

Yang Kewei, an analyst with China Real Estate Information Corp, said the sales boom in third and fourth-tier cities, which propelled the comeback in June, was now scaling back and this dragged down July data.

This trend was evident in China Evergrande Group’s July data, which showed that contracted sales by value fell 28 per cent over June to 44.2 billion yuan, according to a public filing. One of China’s top three developers, Evergrande is known for its vast property supply in third and fourth-tier cities.

The country’s two other largest developers also saw slower sales in July. Country Garden’s contracted sales fell 23 per cent over June to 45 billion yuan while China Vanke’s dropped 27.6 per cent to 35.6 billion yuan.