China property sales growth slides to lowest since November 2015

A man works at a construction site of a residential skyscraper in Shanghai, on Nov 29, 2016.
A man works at a construction site of a residential skyscraper in Shanghai, on Nov 29, 2016. PHOTO: AFP

BEIJING (REUTERS) - Home sales in China slowed sharply in November in the wake of government cooling measures, and new property investment slowed significantly from recent record levels - suggesting a key economic driver could be losing steam.

Property sales growth slid in November to 7.9 per cent from a year ago, its lowest since November 2015, and well short of October's 26.4 per cent increase.

"The cooling in property market is within our expectations. It will continue to cool, and fall to negative growth next year since the base figures were so high," said Zhao Yang, Nomura's chief china economist. "If the government doesn't ramp up infrastructure spending, the expected decline in property will certainly drag on growth."

Growth in property investment at 5.7 per cent in November from a year earlier was less than half the 13.4 per cent growth rate posted in October, Reuters calculated from data issued by the National Bureau of Statistics (NBS) on Tuesday (Dec 13).

Property sales by floor area in the first 11 months rose 24.3 per cent, slowing from 26.8 per cent growth in January-October, while real estate investment grew 6.5 per cent for the first 11 months of the year, slowing from 6.6 per cent in the first 10 months.

Those growth rates are in stark contrast to a robust recovery in home prices and sales that supported the economy in the first three quarters of the year, bolstered by government stimulus measures implemented early this year.

New construction starts in November were up 3.3 per cent from a year ago, measured by floor area, a sharp drop from a 19.9 per cent rise in October.

But Tuesday's downbeat data might not be altogether unwelcome. In recent months policymakers have begun to worry about an overheating property market and the risk of a sudden and sharp price fall damaging the economy.

Regulators have told banks to strengthen risk management around property loans. More restrictions on home purchases have been implemented to curb soaring prices, helping to slow down property investment.

National Statistics Bureau (NBS) spokesperson Mao Shengyong said at a briefing on Tuesday that property control measures have achieved intended initial results.

The property sector contributed 8 per cent to China's GDP growth in the first nine months of 2016, according to China's National Statistics Bureau.

But a Chinese government think tank has identified 35 major cities at "high risk" of a residential property price correction, including China's major first- and second-tier cities.

The National Academy of Economic Strategy, a part of the Chinese Academy of Social Sciences (CASS), warned in a report dated Nov 30 that an "overcorrecting" property market would drag on economic growth and impair financial stability.

NBS's Mao said in November that property investment would accelerate or remain at current levels for the rest of the year, due to a low-base effect.

China still faces a large glut of housing inventories in smaller cities although inventory floor area last month fell a fractional 0.01 per cent from a year earlier, compared to a 1.3 per cent rise in October.