China Home-Price Recovery Spreads to More Cities Amid Easing

Updated on
  • Home prices rose in 39 cities in December, 33 in November
  • Real estate viewed as `haven assets', fueling price increases

China’s home-price recovery spread to more cities in December, especially smaller ones, after authorities rolled out easing measures targeting regions with a surplus of unsold homes.

New-home prices climbed in 39 cities, compared with 33 in November, among the 70 cities tracked by the government, the National Bureau of Statistics said Monday. They dropped in 26 cities, compared with 27 in November, and were unchanged in five.

China's Housing Market Is Stabilizing: CLSA

China’s politburo, the top decision-making body of the Communist Party, last month vowed to reduce home inventory as one of its key tasks in 2016, prompting expectation of more easing measures. The area of unsold new homes nationwide increased 12 percent from a year earlier to 441 million square meters (4.7 billion square feet) as of Nov. 30, according to the latest available data from the statistics bureau.

“Policy will continue to be supportive this year to sustain economic growth and market destocking,” said Jeffrey Gao, a Hong Kong-based analyst at Nomura Holdings Inc.

Regional Divergence

New-home prices in the southern business hub of Shenzhen jumped 3.2 percent from a month earlier, the quickest pace since October. The financial center of Shanghai trailed Shenzhen to increase 1.9 percent, the fastest in six months. Prices of the two cities jumped 47 percent and 16 percent from a year earlier. Prices rose 0.4 percent in the capital city of Beijing and 0.7 percent in Guangzhou. Cities seeing declines included Changde city in southern Hunan province, where prices slid 0.6 percent, and in northeastern Dandong city, where they fell 0.9 percent.

Price increases are still very concentrated in a small segment of the property market nationwide, Nicole Wong, Hong Kong-based head of property research at CLSA Ltd., said Monday on Bloomberg Television.

“What the government wants, which is a pick-up in the economy, is more difficult this time,” Wong said.

Property Glut

China should focus on clearing a property supply glut in third-and fourth-tier cities, a process likely to take four to five years, compared with one year in second-tier cities, Wang Jianlin, the Chinese tycoon who controls Dalian Wanda Group Co., said Monday at the Asian Financial Forum in Hong Kong.

The central bank has reduced interest rates six times since November 2014, along with a cut on reserve requirements for all banks, helping to bring personal mortgage rates to the lowest in five years, according to Centaline Group. Adding to eased credit, the central bank last year also scaled back down-payment requirements for purchases of first and second homes, allowing prospective buyers to borrow more.

Year-on-year, prices rose in 21 cities from the previous month, the same as in November, the statistics bureau said Monday. Existing-home prices rose last month in 37 cities from the previous month, compared to 40 in November.

‘Haven Assets’

The gains in home prices accelerated last month in some popular second-tier cities. Prices in the tourist cities of Hangzhou and Xiamen gained 1.1 percent and 1.3 percent from a month earlier, leading to 5.6 percent and 6.4 percent year-on-year increases.

“Capital is more active in first-tier cities and second-tier cities,” said Zhang Chenghang, a Shanghai-based analyst at CEBM Group, an advisory company. “As the returns of most assets are not satisfying, capital is flowing to real estate as haven assets in the short term."

China’s stocks are heading for a bear market, with the benchmark Shanghai Composite Index falling below its closing low during a $5 trillion rout in August. Government bond yields fell last week to a record low amid a weakening currency, while the flood of data later this week may show a deepening economic slowdown.

In most third-tier cities, home prices are still declining, leading to a wider regional divergence between cities, the statistics bureau said in a statement released with the data. Excessive inventories have yet to be cleared in these regions, the bureau said.

“Homebuyers are very differentiated. They are only going after the first-tier cities and selective second-tier cities,” CLSA’s Wong said. “For third-tier cities, they’re actually staying away from it.”

— With assistance by Emma Dong

Before it's here, it's on the Bloomberg Terminal. LEARN MORE