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September 19, 2017

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Cooldown in the hottest property markets

CHINA’S property market continued to show signs of cooling last month as home prices fell or posted slower growth in major cities amid tough control policies.

It was the first time in three years that prices in the 15 hottest markets singled out by the National Bureau of Statistics — four first-tier cities and key second-tier ones — have all stopped rising on a monthly basis after nearly six months of intensified controls.

Shanghai, Beijing and Xiamen in southeast China’s Fujian Province were the cities where new residential property prices were unchanged from July while the other 12 all registered month-on-month decreases ranging from 0.1 percent to 0.7 percent, according to the bureau.

Prices in Shanghai and Beijing rose 2.8 percent and 5.2 percent, respectively, from a year earlier.

On a year-on-year basis, increases in the cost of new homes in the 15 cities decelerated by 1.3 to 6.6 percentage points from a month earlier, according to the bureau, which monitors prices in new and pre-owned markets across 70 major cities.

“In first-tier and major second-tier cities, the real estate market continued to stabilize in August, driven by targeted regulation policies,” said Liu Jianwei, a senior statistician at the bureau.

Shenzhen saw prices fall 1.9 percent from a year earlier, the first annual fall since March 2015, while its monthly decline further deepened to 0.4 percent from July’s 0.2 percent.

“In general, the domestic housing market posted rather stable performance last month mainly because of the rein-in policies and the traditional low-season effect,” Shanghai Centaline Property Consultants Co said in a report.

“New home transactions continued to shrink in August with first-tier cities suffering the largest setbacks.”

However, the latest figures showed that speculators are continuing to move into smaller cities where there are fewer controls.

New home prices in third-tier cities rose a faster-than-average 0.4 percent in August, but slowed from their 0.6 percent gain in July, the bureau said.

Guilin, a smaller third-tier city in south China’s Guangxi Zhuang Autonomous Region, was the top performer in August, with prices rising 1.1 percent compared with July.

Analysts say China’s property market may become even more polarized over the next few months as falling inventories of completed homes could drive up prices in smaller cities, especially at a time when the market is entering the “golden September, silver October” peak sales season.

Nearly a third of Chinese households believe prices will continue to rise in the coming quarter, a survey by China’s central bank last week showed.

Rocketing prices, especially in major cities, had fueled concerns about asset bubbles. Since the end of 2016, dozens of local governments have passed or expanded their restrictions on house purchases and increased the minimum down payments required for a mortgage.

The market was also cooled by relatively tightened liquidity conditions as the government moved to contain leverage and risk in the financial system.

Last Thursday, the statistics bureau said the pace of growth in property development investment had “mildly retreated” in the first eight months of the year.

In the January-August period, China’s fixed-asset investment hit 39.42 trillion yuan (US$6 trillion), up 7.8 percent year on year. But the pace was slower than the 8.3 percent increase in the first seven months.

Housing sales measured by floor area gained 12.7 percent in the January-August period, retreating 1.3 percentage points from the January-July period.

At the end of August, 623.5 million square meters of property remained unsold, down by 11.4 million square meters from a month earlier, official data showed.

“The year-on-year price data remained within expectations, showing government cooling measures have gradually taken effect,” said Yan Yuejin, a senior researcher with E-house China R&D Institute.

The asset bubbles were squeezed further in the first-tier cities, Yan said, citing month-on-month price drops in these cities.

China should accelerate the establishment of a long-term mechanism to stabilize the property market, said Liu Hongyu, head of the real estate research institute at Tsinghua University.

A long-term mechanism should feature increased land supply and a sound housing finance system, real estate tax system and urbanization infrastructure construction, Liu said.


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