China's home price growth slows amid cooling economy

BEIJING • China's new home prices grew at a slower pace last month as a cooling economy and existing curbs on speculative buying put a dent on overall demand.

Chinese regulators have vowed to refrain from stimulating the property sector as they roll out measures to boost the broader economy hit by the United States-China trade war and slowing consumer demand.

Average new home prices in China's 70 major cities rose 0.5 per cent month on month in August, less than July's 0.6 per cent growth, and was the slowest increase since February, Reuters calculated from China's official National Bureau of Statistics (NBS) data yesterday.

However, it still marked the 52nd straight month of gains.

On a year-on-year basis, average new home prices in China's 70 major cities rose 8.8 per cent last month, compared with a 9.7 per cent gain in July and the slowest since October last year.

Most of the 70 cities surveyed by the NBS still reported monthly price increases for new homes, though the number was down to 55 from 60 in July.

The property sector has held up as one of the few bright spots in the world's second-largest economy.

China's property investment grew at its fastest pace in four months in August, data showed on Monday, in contrast to a protracted slowdown in industrial output and investment.

But some analysts said the rebound in investment was likely due to developers rushing to meet government requirements before they can start sales on growing financing pressure and worries about the market's prospects as regulators have made clear that supervision is only set to tighten.

Beijing-based analyst Yang Yewei at Southwest Securities noted that some developers have opted to cut prices, although the government's tight control over new launches suggests they may not tolerate large discounts.

A resilient real estate market has provided some cushion for China as policymakers try to revive the ailing manufacturing sector and restore flagging consumer confidence amid an escalating trade war with the US.

But regulators are walking a tightrope as rapidly growing household debt and ever-rising home prices have deepened fears about a sudden market correction and concerns over housing affordability.

In a sign that the government has turned more hawkish on its housing policy as it manoeuvres to pump more credit into other areas of the economy, top Chinese leaders said in July that they will not resort to using the housing market as a form of short-term stimulus.

Slower price increases may give the authorities breathing room as they refrain from stimulating the property sector, but economists at Nomura expect some tightening measures to be eased around the year end.

"Any attempt to stabilise growth by choking credit to the property sector could backfire," they said, noting that the sector comprises about one-quarter of China's gross domestic product.

China's average residential property prices are estimated to rise 6 per cent this year from a year earlier, according to a Reuters poll published last month.

The forecast was slightly higher than the 5 per cent projected in the last poll conducted in March, but is significantly lower than the 9.7 per cent gain seen last year.

REUTERS

A version of this article appeared in the print edition of The Straits Times on September 18, 2019, with the headline 'China's home price growth slows amid cooling economy'. Print Edition | Subscribe