Chinese home prices rise again

Home prices rose in 27 of 70 Chinese cities, with first-tier centres like Beijing (above) leading the rise. The government has relaxed tax rules and cut downpayments for second-home buyers. Its pro-growth policy and cuts to interest rates also booste
Home prices rose in 27 of 70 Chinese cities, with first-tier centres like Beijing (above) leading the rise. The government has relaxed tax rules and cut downpayments for second-home buyers. Its pro-growth policy and cuts to interest rates also boosted sales and market sentiment. PHOTO: REUTERS

Second increase in a row a sign that efforts to boost property sector are gaining traction

BEIJING • Chinese home prices rose for a second month in a row last month, on a monthly basis, indicating that government efforts to boost the struggling property sector have started to gain traction.

Average new home prices rose 0.4 per cent in June versus May, according to Reuters calculations from official data published yesterday. That was a faster gain than the 0.2 per cent rise in May, the first monthly rise since April last year.

Prices in 27 of the 70 cities recorded increases, with first-tier centres including Shenzhen and Shanghai leading a rebound. Prices were unchanged in 10.

The second month of rising prices is a sign of a bottoming out for one of the country's key sectors, and should ease fears of a sharp slowdown in China's economy.

Last Wednesday, China reported annual growth of 7 per cent in the second quarter of this year.

TOO MUCH SUPPLY

There are many Chinese cities sitting on a sizeable inventory of unsold homes. It's not easy for home prices to be up in those cities.

Mr Liu Yuan, head of research at property consultant Centaline in Shanghai.

A mild recovery in the market could be welcomed by the government as long as it does not turn into a swift rebound, which would risk rekindling property bubbles.

Mr Sheng Laiyun, spokesman for the National Bureau of Statistics (NBS), said last Wednesday that the property sector showed marked improvement in the second quarter, boding well for the broad economy.

Still, high inventories of unsold homes have weighed on most small cities, and developers have slowed the pace of construction, underscoring the unlikeliness of a quick recovery in the property market.

"There are many Chinese cities sitting on a sizeable inventory of unsold homes. It's not easy for home prices to be up in those cities," said Mr Liu Yuan, head of research at property consultant Centaline in Shanghai.

Official data last week showed China's unsold floor space totalled 657.4 million sq m at the end of last month, up 20.8 per cent from the same period a year ago.

The government has relaxed tax rules and cut downpayments for second-home buyers in the past few months. Its pro-growth policy, which included four cuts to benchmark interest rates since November, also helped boost property sales and change market sentiment.

With sales rebounding and home buyers turning more optimistic about the market, some developers have started to raise prices.

Prices in the wealthiest cities led the gains, but most third-tier cities still saw prices fall, highlighting a growing divide in the market.

"There are relatively strong housing demand and transactions in the first-tier cities, where home price gains are much higher than those in second- and third-tier cities," said Mr Liu Jianwei, a senior statistician at the NBS.

The southern city of Shenzhen was the top performer, recording the third consecutive month of rebound. Shanghai's prices also swung into positive year-on-year growth. Shenyang and Guiyang also reversed declines.

While home sales jumped 13 per cent in the first half of this year, compared with a 9 per cent decrease a year earlier, investment in property development slowed to 4.6 per cent from 14.1 per cent.

"The trend of polarisation is still evident among different cities," the statistics bureau said in a statement, adding that demand was robust in first-tier cities while smaller centres struggled.

REUTERS,BLOOMBERG

A version of this article appeared in the print edition of The Sunday Times on July 19, 2015, with the headline 'Chinese home prices rise again'. Print Edition | Subscribe