BEIJING • China's home price growth slowed in July, with Beijing declining for second straight month, reinforcing expectations that property price growth may stagnate over the course of the year.
Government restrictions to keep prices in check weighed on larger cities, with July showing the slowest growth since August 2016, while smaller centres pulled back but remained robust.
Policymakers have prioritised stabilising the property market ahead of an autumn leadership reshuffle, stressing the need to avoid dramatic price fluctuations that could threaten the financial system and harm social stability.
As China's home price rises have generally been moderating and sales are slowing, analysts do not see a major risk of a sharp price fall or crash, given the strength of underlying housing demand.
"We need the administrative measures in the short term but keeping them long-term would be a retreat for the market economy," said Mr Joe Zhou, Jones Lang LaSalle head of research for China .
Nonetheless, developers expect the curbs to be longer-term. Shanghai-listed Future Land vice-president Ouyang Jie believes the curbs will be in place for the next five years under the new government that follows the leadership reshuffle. "We think the current restrictions on purchases, borrowing and price growth will continue for five years, but the price cap over new units may be relaxed gradually over the years," he said.
Analysts say the speculative switch to smaller cities and their large housing overhang has resulted in an alarming rise in debt in those centres. Mr Zhou said: "I think the small city boom is a trap... It won't last long because I don't see the possibility of a huge drop in inventory there while there is not enough population inflow to support demand."
Increase in average new home prices in China's 70 major cities in July from the previous month, slowing from the 0.7 per cent growth in June.
While the statistics bureau says the housing market should still be able to maintain stable growth, many economists expect the residential sector to lose momentum in the second half of the year in the face of policy tightening and an official financial deleveraging drive.
Average new home prices in China's 70 major cities rose 0.4 per cent in July from the previous month, slowing from the 0.7 per cent growth in June as policymakers battled to rein in demand.
Beijing's new home prices fell 0.1 per cent in July, after declining 0.4 per cent in June. Shanghai prices stalled while Shenzhen prices fell 0.2 per cent from a month ago.
Compared with a year ago, new home prices in the major cities rose 9.7 per cent in July, easing from a 10.2 per cent gain in June, Reuters calculated from National Bureau of Statistics data.