China property sales drop for first time since March 2015

A worker outside a construction site in Beijing's Central Business District on Tuesday. New construction starts by floor area in China rose just 1.4 per cent on the year last month, slowing from a 5.3 per cent increase in August.
A worker outside a construction site in Beijing's Central Business District on Tuesday. New construction starts by floor area in China rose just 1.4 per cent on the year last month, slowing from a 5.3 per cent increase in August.PHOTO: AGENCE FRANCE-PRESSE

Impact of softening market seen in slightly slower economic growth of 6.8% in Q3

BEIJING • Property sales in China dropped for the first time in more than 21/2 years last month and housing starts slowed sharply.

Real estate, which directly affects 40 other business sectors in China, is a crucial driver for the economy but also poses a major risk as Beijing looks to tame soaring home prices without triggering a crash or a sharp drop in construction activity.

Property sales by floor area fell 1.5 per cent in September from a year earlier, compared with a 4.3 per cent increase in August and a 34 per cent jump in September last year, according to Reuters calculations based on official data released yesterday.

That marked the first annual decline since March 2015.

"The negative September sale number shows that, unequivocally, the property boom has peaked," said Ms Rosealea Yao, a property analyst at Gavekal Dragonomics.

"We have seen some big rebounds at the end of the first and second quarters, but given how fast the sale numbers are declining, we expect no big rebound this time," she said.

NO BIG REBOUND EXPECTED

The negative September sale number shows that, unequivocally, the property boom has peaked... We have seen some big rebounds at the end of the first and second quarters, but given how fast the sale numbers are declining, we expect no big rebound this time.

MS ROSEALEA YAO, property analyst at Gavekal Dragonomics.

New construction starts by floor area, a volatile but telling indicator of developers' confidence, rose just 1.4 per cent on the year last month, slowing from a 5.3 per cent increase in August, Reuters calculated.

The softening in property activity appeared to drag on broader growth in the third quarter, as many economists had predicted. China's economy grew 6.8 per cent in the third quarter from a year earlier, easing from 6.9 per cent in the second quarter.

Property investment did rise 9.2 per cent in September, picking up pace from an expansion of 7.8 per cent in August, but analysts noted such investment usually lags sales trends by up to six months.

While home prices have levelled off or softened in the biggest cities in recent months in response to a flurry of government cooling measures, property bubbles are still a threat in other parts of the country.

Small cities have had to unveil fresh property curbs in recent weeks after speculators turned their attention to less-restricted cities that have massive overhangs of unsold houses.

Moreover, high prices are forcing many home buyers to take on more debt, potentially weighing on future household consumption and leaving banks more exposed to any property downturn even as Beijing looks to rein in financial system risks.

Household loans, mostly mortgages, rose to 734.9 billion yuan (S$150.6 billion) last month from 663.5 billion yuan in August, despite rising mortgage rates, according to Reuters calculations based on the central bank's data out on Saturday.

Short-term loans also soared in the third quarter, suggesting that speculators may be trying to circumvent property cooling measures, economists said.

REUTERS

A version of this article appeared in the print edition of The Straits Times on October 20, 2017, with the headline 'China property sales drop for first time since March 2015'. Print Edition | Subscribe