China’s home prices fell for a third month in November as developers started to cut prices to boost sales amid the government’s housing curbs, according to SouFun Holdings Ltd. (SFUN)
Home prices dropped 0.28 percent last month from October, when they retreated 0.23 percent, according to SouFun, the nation’s biggest real estate website owner. Prices slid in 57 of 100 cities tracked by the company, including in all 10 of the country’s biggest cities such as Shanghai and Beijing, it said in an e-mailed statement.
Premier Wen Jiabao has said the government won’t relax property curbs after raising down-payment and mortgage requirements and imposing home purchase restrictions in about 40 cities this year to avert a bubble. The central bank also increased interest rates three times and reserves ratio six times in 2011, before announcing yesterday it’s planning to cut the reserve requirement for the first time in three years.
“The home prices are falling at a faster pace since turning points appeared in September,” Shen Jian-guang, a Hong Kong-based economist at Mizuho Securities Asia Ltd., said by phone today, predicting further declines in prices next year. “The government’s tightening measures on the real estate market will continue as bank loans for the sector won’t be loosened despite the reserve ratio cut announcement last night.”
Prices in Shanghai declined 0.47 percent, and those in Beijing slipped 0.08 percent, according to SouFun. Ningbo, located south of Shanghai, posted the biggest drop of 2.25 percent, while the coastal city of Weihai in Shandong province climbed the most, adding 1.78 percent, SouFun said. The data comes ahead of the government’s figures for 70 cities it monitors, which is scheduled to be released on Dec. 18.
The retreat for Shanghai’s new home prices was 1.1 percent in November from October, Shanghai UWin Real Estate Information Services Co. said today. The average price dropped to 21,069 yuan ($3,310) per square meter (10.76 square feet), and new home sales rose 7.4 percent to 491,300 square meters, the real estate data company said in an e-mailed statement.
More affluent or tier-one and two cities were affected by the government’s curbs, with developers such as China Vanke Co. (000002), the country’s biggest publicly traded real estate company, Shanghai Greenland Group and Longfor Properties Co. (960) cutting prices for projects in cities including Shanghai and Beijing, SouFun said.
‘Just the Beginning’
“This is just the beginning,” Jinsong Du, a Hong Kong- based analyst at Credit Suisse Group AG, said before the release of the data. “The property price will continue to come down next year. Transaction volume will also continue to be weak even after property companies cut prices.”
Du said nationwide home prices may fall 10 percent by the end of the year, and predicted a similar decline in 2012.
China’s property market has reached a “tipping point” and the slowdown in the housing industry will have a spillover effect on demand for steel and other construction materials, according to Nomura Holdings Inc. The risk of economic growth falling to less than 8 percent in the first quarter is also higher than before because of the housing market, Zhang Zhiwei, a Hong Kong-based economist at Nomura, said last week.
Residential property investments accounted for 6.1 percent of the country’s gross domestic product last year, according to Citigroup Inc. The nation’s manufacturing also contracted for the first time since February 2009 as the property market cooled and Europe’s crisis cut export demand, according to the China Federation of Logistics and Purchasing’s survey today.
Reserve Ratio Cut
The reserve ratios for banks will decline by 50 basis points effective Dec. 5, the central bank said on its website yesterday. The move may add 350 billion yuan ($55 billion) to the financial system, according to UBS AG.
The cut drove China’s property stocks higher, with the gauge (SHPROP) tracking real estate companies on the benchmark Shanghai Composite Index (SHCOMP) surging 3.2 percent at the close, the most in five weeks.
China’s home prices fell in 33 of 70 cities monitored by the government in October, the worst performance since it expanded property curbs and scrapped the reporting of national average housing data this year, according to figures from the statistics bureau on Nov. 18.
Home prices will fall between 15 percent to 30 percent in the next two years, Mark Mobius, who oversees $40 billion as Hong Kong-based executive chairman of Franklin Templeton Investments’ Emerging Markets Group, said last month, while BNP Paribas predicted a 10 percent decline by the second half of next year.
“Once the price comes down, the transaction volume will actually weaken even more,” Du at Credit Suisse said. “People buy on the way up, they don’t buy on the way down.”
The government is likely to “micro-adjust” or even reverse policy restrictions if home prices drop by 20 percent, Barclays Capital Research’s Hong Kong-based economist Huang Yiping said last month. CBRE Global Investors, manager of $94.8 billion of real estate assets, is mulling its first investment in China’s housing market in four years in anticipation the government will start easing its property curbs, Greater China Country Manager Richard van den Berg said on Nov. 14.
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