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Rate cut no effect as China鈥檚 home prices drop for 7th straight month
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CHINA’S housing prices fell on a monthly basis for the seventh straight month in November, a survey showed yesterday, with the market yet to feel the full impact of an interest rate cut.
The average price of a new home in China’s 100 major cities was 10,589 yuan (US$1,724) per square meter in November, down 0.38 percent from October, the independent China Index Academy said in a statement.
The fall was a slight improvement from the 0.4 percent month-on-month drop in October, previous figures showed.
“We expect the interest rate cut to kick in next year,” said Bai Yanjun, research director for the China Index Academy.
“We still believe the market is under downward pressure for the rest of 2014 because the current home inventory levels in first-tier and major second-tier cities are still high,” he said.
China cut both lending and deposit rates just over a week ago, and analysts said home mortgage buyers would be among the biggest beneficiaries.
“The rate cut sends a strong signal that the property market will likely bottom out soon,” Lu Ting, China economist for Merrill Lynch Hong Kong, said in a research note.
On a year-on-year basis, China’s new home prices fell 1.57 percent from the same month of last year, far sharper than the annual fall of 0.52 percent in October, the academy said.
But for China’s 10 biggest cities — which tend to have the most active property markets — new home prices rose 0.07 percent in November from October, marking the first gain after six months of drops, it said.
Shanghai was the best performing with housing prices rising 1.18 percent in November from October to 32,140 yuan per square meter, making it the second-most expensive city behind Beijing.
China had previously sought to rein in runaway property prices by introducing market control measures including limits on buying second and third homes.
But cities began rolling back some of the measures this year, as China’s economy slowed and the central government relented.
The surprise interest rate cut was the first in over two years.
China’s central bank cut the benchmark one-year lending rate by 0.4 percentage points to 5.6 percent, and trimmed the one-year deposit rate by 0.25 percentage points to 2.75 percent.
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