China Home-Price Gains Ease as Sales Weaken on Government’s Credit Curbs
China’s home prices gained in fewer than half of the 70 cities monitored by the government in September for a second month as sales eased following harsher policies to curb the risks of asset bubbles.
New home prices in the most affluent cities, including Beijing, Shanghai, Shenzhen and Guangzhou, were among 30 that were unchanged from August, the statistics bureau said in a statement on its website today. A total of 16 cities posted month-on-month declines in housing values and 24 recorded gains.
Chinese developers’ credit outlook will be “increasingly severe” amid government efforts to curb rising home prices, Standard & Poor’s said in a report on Sept. 27. The government increased down-payment requirements and mortgage rates on some homes this year and issued home purchase restrictions in about 40 cities.
“The correction in China’s property market has already started,” Yao Wei, a Hong Kong-based economist at Societe Generale SA said in a phone interview today. “The Chinese government would like to see home prices fall further before easing the measures.”
Home prices would need to fall between 5 percent and 10 percent before the government eases its curbs, she said.
Chongqing, one of the only two cities the government imposed property taxes in this year, posted the steepest decline as prices dropped 0.4 percent from August, while Changsha, Kunming, Yinchuan and Luoyang had the largest gain of 0.3 percent, the bureau’s data showed.
Wenzhou
Prices rose in 69 of the 70 cities from the same time last year, with the city of Wenzhou reporting the only decline, according to the data. China’s Premier Wen Jiabao visited the city in eastern Zhejiang province this month amid reports of surging bankruptcies among private companies unable to repay debt to so-called underground lenders.
In August, 16 cities posted a decline in home prices and 31 were unchanged from July, the first time fewer than half of the locations recorded a gain, according to Samsung Securities Co.
“China’s property curbs have showed positive effect, but we’ll still need to cement the result and closely monitor the market,” said Sheng Laiyun, a spokesman for the national statistics bureau in a press conference in Beijing.
Mixed Sales Data
The country’s biggest property companies reported mixed sales data last month. China Vanke Co., the country’s largest listed developer, said September’s sales dropped 12 percent from a year earlier, and China Overseas Land & Investment Ltd. posted an 18 percent decline. Evergrande Real Estate Group Ltd., the country’s second biggest by sales, said September sales surged 79 percent.
Existing home prices in Beijing fell 0.4 percent last month from August, while those in Shanghai rose 0.1 percent, according to the bureau.
China’s property sales rose 23 percent to 3.9 trillion yuan ($611 billion) in the first nine months, while development investments gained 32 percent in the period to 4.4 trillion yuan, according to government data today. New property construction climbed 24 percent to 1.48 billion square meters (16 billion square feet) between January and September.
“China’s property investment is holding up as it could be due to social housing and delayed construction expenses,” Nicole Wong, a Hong Kong-based property analyst at CLSA Asia- Pacific Markets, said in an e-mailed reply.
Economic Growth
China’s economy grew 9.1 percent in the third quarter from a year earlier, the bureau said today. The expansion, the slowest since 2009 following monetary tightening and weaker export demand, was less than the median estimate of 9.3 percent in a Bloomberg News survey of 22 economists.
Longfor Properties Co., the developer controlled by China’s richest woman Wu Yajun, said it priced its Shanghai luxury villa project “Affecting Yard” at a similar level as neighboring developments. It usually sells its new homes at a price that’s higher than existing neighboring properties, it said.
Luxury home developers are finding it harder to resist price reductions as banks in 14 cities including Shanghai and Guangzhou raise mortgage rates for first homes by as much as 50 percent, Shanghai Securities News reported today.
The government’s home price data may not fully reflect market trends because there are “hidden price adjustments” to housing values, including incentives such as the absorption of interest by developers, Wong said.
A gauge tracking property shares on the Shanghai Composite Index fell 2.9 percent at the close, the biggest drop in four weeks. Longfor declined by a record 11 percent at the close in Hong Kong.
Private data also showed signs that China’s property market is cooling. Home prices slid 0.03 percent last month from August, the first decline in a year, according to SouFun Holdings Ltd., operator of the country’s biggest real estate website.
The southern Chinese city of Foshan suspended its decision last week to ease limits on property purchases less than a day after it said it would allow residents to buy a second home on Oct. 11.
--Bonnie Cao. Editors: Linus Chua, Andreea Papuc
To contact Bloomberg News staff for this story: Bonnie Cao in Shanghai at +86-21-6104-3035 or bcao4@bloomberg.net
To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net
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