BEIJING (BLOOMBERG) - China’s home price declines eased for a second month in January, offering a rare glimmer of hope to the embattled property sector.
New home prices in 70 cities, excluding state-subsidised housing, fell 0.04 per cent last month from December, when they dropped 0.28 per cent, National Bureau of Statistics figures showed on Monday (Feb 21). Prices in large cities rose.
Sentiment in China’s home market has been dented by a worsening liquidity crisis among real estate developers following a regulatory clampdown on excessive leverage. Shares of Chinese developers slumped on Monday after Zhenro Properties Group warned it may not meet its obligations, another negative surprise only weeks after it announced plans to redeem a perpetual bond.
Chinese authorities have recently been tweaking some of their tightening measures in a bid to arrest the property slowdown, which has been hurting growth in the world’s second-largest economy. Banks in several Chinese cities have cut mortgage down payments for some homebuyers, local media reported last week, in a move that may boost flagging housing demand.
“The data set is a small positive signal that the quarter-long credit easing in the property sector has curbed an abrupt slowdown,” said Yan Yuejin, research director at E-house China Research and Development Institute. “If the credit loosening continues, we can pin hopes on a more evident warm-up in the second quarter.”
Home prices have begun to pick up across national hubs and regional economic centers. The four largest cities saw prices climb 0.65 per cent on average last month, the biggest increase since June. Values gained 0.06 per cent in so-called tier-2 cities following three months of declines.
Still, values in tier-3 cities slipped 0.21 per cent, the fifth consecutive monthly drop. And prices across the nation in the secondary market declined 0.28 per cent, down for a sixth month.
A Bloomberg Intelligence index of Chinese developer stocks dropped as much as 2.8 per cent on Monday morning, after Zhenro said late Friday that it may not have enough cash to meet its debt payments next month.
Even with home values showing signs of stabilising, a slump in sales is continuing to add pressure on builders’ cash flows. The top 100 developers saw sales drop 40 per cent in January from a year earlier, according to preliminary data from China Real Estate Information Corp.
Chinese banks refrained from cutting interest rates for a third straight month Monday, following the central bank’s lead. The People’s Bank of China maintained the interest rate for one-year policy loans last week while injecting a net 100 billion yuan into the banking system through loans.
“There is room for further monetary easing, but it does not seem to be imminent,” said Frances Cheung, rates strategist at Oversea-Chinese Banking Corp in Singapore.
Although some in the market are expecting more support from fiscal policy this year, the property market downturn is putting a strain on the finances of China’s local governments, which rely on land sales for much of their income. Some local authorities are predicting their general revenue this year will be significantly weaker than an expected national economic growth target of at least 5 per cent, according to a Bloomberg analysis of budget reports.
For many developers, it’s unlikely that the crisis will end soon. Yu Liang, chairman of China Vanke, urged staff to prepare for a battle that could make or break the firm, the South China Morning Post reported last week.
Global credit rating firms are withdrawing their assessments on property bonds, while a string of auditor resignations is adding to doubts over financial transparency weeks before earnings season.