1. Smaller cities keep China property market hot in April

Smaller cities keep China property market hot in April

Home prices in China's biggest cities softened in April as administrative curbs to dampen a red hot property market took effect, but robust demand in smaller cities resulted prices nationwide rising by their strongest in six months.

By: | Published: May 18, 2017 12:17 PM
Average new home prices rose 0.7 percent in April, faster than the 0.6 percent increase in March, Reuters’ calculation of National Bureau of Statistics data showed.

Home prices in China’s biggest cities softened in April as administrative curbs to dampen a red hot property market took effect, but robust demand in smaller cities resulted prices nationwide rising by their strongest in six months. Average new home prices rose 0.7 percent in April, faster than the 0.6 percent increase in March, Reuters’ calculation of National Bureau of Statistics data showed. And although that was the biggest monthly rise since October analysts stuck to their view that the property market has peaked thanks to measures taken to stifle speculation, and the question was only when it would come down.

“We expect tightening measures to increase in severity for the rest of the year, though we do not see a severe correction in prices, developers should suffer from a tight liquidity environment and continued declines in transaction volume,” North Square Blue Oak, a London-based boutique investment bank, said in a note commenting on the data.

“While timing will vary city-by-city, we expect to see a price inflection point in many markets with price growth slowing under demand containment measures but cushioned by lack of supply.” Despite slightly sharper gains on average, more cities reported price drops or slower price rises compared with March, the NBS said in a note accompanying the data release on Thursday.

SPILLOVER

Since late March authorities in the bigger cities have intensified their campaign to drive speculators out of the property market, taking steps like forbidding buyers from selling newly purchased homes too quickly. But as result some demand spilled over into smaller cities where curbs are less stiff.

In China’s Tangshan city, a small city near capital Beijing, prices growth more than doubled in April from a month ago to 2.2 percent, NBS data showed. The Tangshan government announced new curbs to cool the market on Thursday. But analysts stuck to the view that the sizzling property market has peaked, leaving the question of when it would come down.

“April’s data shows prices are still relatively steady. But as sales have dropped a lot in April, it will cool eventually,” said Rosealea Yao, property analyst at Gavekal Dragonomics. Data released on Monday by the NBS had shown the area of property sold in April grew by the slowest rate since December 2015.

Prices in China’s smaller cities, or known as tier-3 cities, rose 0.9 percent in April from a month ago, while growth in tier-2 cities remained flat at 0.6 percent, Yan Yuejin, an analyst with E-House China R&D Institute, said after analysing the official data. But in China’s biggest cities, the rate of increase halved to 0.3 percent, he said.

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China’s financial hub Shanghai, and Nanjing both announced earlier this month the introduction of a lottery system for new home sales to correct market irregularities. Prices for new units in Beijing in April grew at a slower pace on a monthly basis, while Shanghai prices dropped 0.1 percent. Shenzhen prices stayed unchanged in April.

A state think tank said on Monday that Beijing was the most expensive city in April with a median price of 63,647 yuan ($9,231) per square metre, or $858 per square feet, followed by Shanghai, Shenzhen and coastal city Xiamen. If the government’s curbs were relaxed, home prices in the biggest cities would likely resume their rise, a senior official from China’s top economic planner warned late last month.

Beijing’s concern over social and economic consequences of runaway real estate market has prompted policymakers to repeatedly pledge intentions for a “long-term mechanism” to stabilise prices. Experts are uncertain what that will entail, but it is expected to include tax and land reforms, though China announced in March it has no plans to implement a nationwide property tax this year.

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