China March New Home Price Increases Ease on Tighter Credit

China’s new-home price increases eased across the country last month amid tighter credit that prompted developers to give discounts.

Home prices from the first-tier cities to those less affluent all weakened in March, according to the National Bureau of Statistics. Prices in the capital city of Beijing rose 10 percent from a year earlier, the slowest since April last year, while those in Shanghai added 13 percent, the smallest since June. The eastern city of Wenzhou fell 3.9 percent from a year ago, according to today’s data.

Developers including Agile Property Holdings Ltd. and Wharf Holdings Ltd. cut home prices in some eastern Chinese cities this year as market sentiment weakened on tight liquidity. China’s broadest measure of new credit fell 19 percent in March from a year earlier and money supply grew at the slowest pace on record, central bank data showed this week.

“Mortgage availability is really constrained,” Michael Klibaner, greater China research head at Jones Lang LaSalle Inc., said in a Bloomberg Television interview in Hong Kong with Rishaad Salamat. “Right now, the buyers are still willing, they’re just constrained because they can’t get the debt. If sentiments start deteriorating, that’s a much bigger problem.”

Prices rose in 56 cities in March from a month earlier, compared with 57 in February, according to today’s data.

Shares Gain

Among China’s second-tier cities, the eastern city of Hangzhou, the provincial capital of Zhejiang, posted a 7.8 percent gain from a year earlier, the slowest since July. Prices in the northwestern city of Xi’an rose 8.3 percent, their smallest increase since August, the statistics bureau’s data showed.

The Shanghai Stock Exchange Property Index rose less than 0.1 percent at the close, reversing a decline of 1.1 percent.

“There are definitely risks in the property market of China’s smaller cities,” Lan Shen, a Beijing-based economist at Standard Chartered Plc, said in a phone interview today. “The property market will be a big factor that presses the country’s economic growth this year.”

China’s expansion moderated to the weakest pace in six quarters and property construction plunged, testing leaders’ commitment to keep reining in credit as risks mount of a deeper slowdown. Gross domestic product rose 7.4 percent in the January-to-March period from a year earlier, the statistics bureau said this week, compared with the 7.3 percent median estimate in a Bloomberg News survey of analysts.

Regulate Differently

Premier Li Keqiang said last month the government will regulate the housing market differently in different cities to take into account local conditions.

Existing home prices rose 13 percent in Beijing last month from a year ago, and those in Shanghai increased 9.5 percent, according to the data.

Home sales fell 7.7 percent in the first quarter to 1.1 trillion yuan ($177 billion) in the first quarter from a year ago, the statistics bureau data showed this week.

Sheng Laiyun, a spokesman for the statistics bureau, said in a briefing this week that “relevant departments will closely follow the changes in the property market and improve property macro-control policies accordingly,” in response to a question on whether housing-market policies would be relaxed.

Beijing and Shanghai, the country’s financial center, as well as the southern business hubs of Guangzhou and Shenzhen are considered “first tier” by the statistics bureau. The four “are characterized by high levels of international business connectivity, deep corporate bases and well-developed international grade stock, and they are the country’s most liquid and transparent markets,” according to Jones Lang LaSalle.

— With assistance by Bonnie Cao

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