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August 19, 2016

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Gains in home prices slow in July

THE rise in home prices in China slowed again in July, with first-tier and selected second-tier cities posting the biggest decline, the National Bureau of Statistics said yesterday.

Last month 51 Chinese cities posted a month-on-month rise in new home prices, four fewer than in June, according to the bureau which monitors prices in 70 cities across the country. Prices fell in 16 cities and were flat in the remaining three.

Growth in property sales by floor area slowed to 26.4 percent in the first seven months, down from 27.9 percent in the first half year, and 33.2 percent in the first five months.

The cooling should come as relief to authorities who have been worried about asset bubbles, but there are concerns that the property sector, one of the economy’s major drivers, is losing steam.

Overheating fears

A recovery in the property market starting from late last year partially helped prop up growth in the Chinese economy, which has been weighed down by cooling investment, the cutting of industrial overcapacity and weak demand.

However, sharp increases in home prices, especially in the big cities, have fanned fears of overheating.

Some of China’s largest cities continued to see eye-popping annual gains, with southern boomtown Shenzhen rising the most by 40.9 percent, but monthly increases have moderated.

Prices rose 20.7 percent and 27.3 percent on-year in Beijing and Shanghai, but added just 1.5 percent and 2 percent from June.

The market also remains uneven, with some smaller cities in hard-hit industrial regions such as “rustbelt” Liaoning Province continuing to see price declines. In many of those areas, local governments are still trying to stimulate demand.

“Our land was bought at reasonable prices, and we will speed up new launches going forward. Land prices are at high levels now, but government is generally still supportive to the sector,” Shao Mingxiao, CEO of Longfor Properties, said at a company earnings conference on Wednesday.

Xiamen in Fujian Province led with a 4.6-percent rise in new home prices last month from June to overtake Hefei in Anhui Province. Hefei followed closely with a monthly price rise of 4.2 percent, easing from a 4.9 percent gain in June. Nanjing, capital of Jiangsu Province, was third with a monthly growth of 3.6 percent.

“The pace of price rises continued to slow in July with gateway cities and some second-tier cities, where home prices accelerated previously, seeing the most notable retreat whereas most of the lower-tier ones were rather stable,” said Liu Jianwei, a senior bureau statistician.

James Macdonald, head of China research at Savills, a global real estate consultancy, cautioned that the price rise in second- and third-tier cities may accelerate.

Annually, new home prices rose in 58 cities in July, fell in 11 cities, and were flat in one.

In the pre-owned market, prices rose in 52 cities last month from a year earlier and fell in the remaining 18 cities.

Meanwhile, less developed areas and smaller cities have been reporting falling prices and huge stocks of unsold houses.

Jinzhou, Dandong and Mudanjiang in northeast Liaoning and Heilongjiang provinces saw year-on-year declines of 3.8 percent, 2.4 percent and 1.2 percent, respectively in July.

“The property market is becoming increasingly polarized,” said Ni Pengfei, a researcher with the Chinese Academy of Social Sciences.

In first-tier cities where the economy is vibrant, abundant job opportunities, an inflow of people and money, and a lack of housing supply combine to push up prices.

The bureau put the inventories of unsold homes, mainly in smaller cities, at 714 million square meters at the end of June, only 21 million less than the previous quarter.

It may take nearly five years to destock the housing sector if homes are sold at the average speed of the past three years, said Huang Yu, a researcher at property research institute, China Index Academy.

The split picture creates a thorny task for the government, which must strike a balance between curbing asset bubbles in big cities and boosting sales in the smaller cities.

Previously, authorities have cut interest rates, reduced downpayment requirements on mortgages, and removed current restrictions in nearly all but the top-tier cities in the hope of boosting sales.

However, the easing has largely failed to stimulate home sales in smaller cities, while further pushing up prices in larger ones.

This duality makes it pressing for authorities to create policies that avoid bubbles and reduce inventories at the same time.

Shenzhen and Shanghai have already tried to curb speculation. In Tianjin and Wuhan, mortgages from housing provident funds were capped in July.


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