China June Home Sales Rise 41% After Interest Rates Cut

China June Home Sales Rise 41% on Month After Interest Rates Cut
A man walks past newly built residential housing in Beijing, China. Photographer: Nelson Ching/Bloomberg

China’s home sales transaction value rose 41 percent in June from the previous month as buying sentiment improved after the government eased monetary policy.

The value of homes sold climbed to 531.3 billion yuan ($83 billion) from 375.7 billion yuan in May, the most this year, based on the difference between the National Statistics Bureau’s data for the first half of the year and the first five months. Housing sales in the first half fell 6.5 percent to 1.9 trillion yuan from a year earlier, according to the data.

China’s economy slowed for a sixth quarter by expanding 7.6 percent in the second quarter from a year ago, raising expectations of further policy easing. The central bank cut interest rates last week for the second time in a month.

“The market is rebounding,” said Alan Jin, a Hong Kong-based property analyst at Mizuho Securities Asia Ltd. Still, “developers in general are still pretty cautious on investment and land acquisition,” he said.

China’s Premier Wen Jiabao said over the weekend that downward pressure on the economy is still “relatively large” and the government will intensify fine-tuning of policies even as measures taken since April are helping stabilize a slowdown.

Investment in homes, office buildings, malls and other real estate gained 16.6 percent to 3.1 trillion yuan in the first half, slower than the 33 percent gain a year earlier, according to the statistics bureau data announced at a press conference in Beijing today. New property construction declined 7.1 percent to 923.8 million square meters (9.9 billion square feet).

Shares Slip

A gauge tracking property shares on the Shanghai Composite Index and the benchmark both ended the day little changed.

Home sales volume dropped 11.2 percent in the first half from last year to 353.5 million square meters, the government data showed today. Property value that including office buildings and retail space fell 5.2 percent to 2.33 trillion yuan from a year ago.

“We should acknowledge that the property curbs were an important factor that drove the slowdown in China’s economy this year,” said the statistics bureau spokesman Sheng Laiyun, in a press conference in Beijing today. “But we shouldn’t relax the curbs, because it will promote a sustainable healthy Chinese economy.”

Property Curbs

While the government has said it won’t waver from its curbs, it has helped ease funding by lenders and vowed to support first-time home buyers. The central bank cut the benchmark one-year lending rate last month for the first time since 2008, after imposing measures in the past two years that included higher mortgage rates and down payment requirements.

“Significant loosening in the property market looks unavoidable in order to entice developers to pick up investment,” Citigroup Inc. analysts led by Hong Kong-based Oscar Choi wrote in a July 11 research note. “Potential powerful measures” include lower down-payment ratios and wider coverage for a public housing fund that provides low-interest mortgages, they said.

“We see a rising momentum of property sales in the second quarter, but that’s not big enough to drive the rebound of property investment. Developers would need total social financing for that,” Chen Li, head of China equity strategy at UBS AG told reporters in Beijing on July 11.

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