China New Home Sales Jump After Interest Rate Cut Boosts Demand

China’s new-home sales jumped last month after the first interest rate cut since 2012 boosted demand and developers made more apartments available to tap improving sentiment in the nation’s property market.

Housing sales surged 41 percent to 938.4 billion yuan ($151 billion) from November and were 4.2 percent higher than a year earlier, making December the first year-on-year increase in 12 months, according to Bloomberg News calculations based on data released by the National Bureau of Statistics today.

Home sales recovered after the central bank cut interest rates in November and eased curbs in an industry that had become a drag on growth. The rebound, which Barclays Plc said would signal the bottom of the property market and serve as a “powerful catalyst” for a recovery, came one month earlier than anticipated, according to the bank’s analyst Alvin Wong.

December’s sales numbers sent “a faster-than-expected signal of the sales recovery,” said Hong Kong-based Wong. “Some cities may start to see some price rise but overall price outlook is just stable.”

Developers added new apartments for sale at a faster pace last month to clear inventories, after the government lowered borrowing costs and eased mortgage restrictions, the statistics bureau said in a Jan. 18 statement. Twelve of 30 developers tracked by Barclays failed to meet their sales targets last year, with Gemdale Corp. achieving only 82 percent of its plans, according to a Jan. 12 report.

High Inventories

The sustainability of the recovery in the real estate market remains uncertain. Inventory levels in the biggest “first-tier” cities of Beijing, Shanghai, Shenzhen and Guangzhou remain at 14 months of sales, near a five-year high, while those for many smaller cities have risen to levels near 48 months of sales, according to SouFun Holdings Ltd.

Shenzhen recorded higher new-home prices in December, the first of the 70 cities tracked by the Chinese government to post an increase in four months, according to official data released Jan. 18. Prices fell in 65 of the cities from the previous month, compared to 67 in November.

Home sales fell 7.8 percent last year, according to the date released today, as tight credit and an economic slowdown sapped demand. The average new-home price in 100 cities tracked by SouFun fell for an eighth consecutive month in December, extending the year’s decline to 2.7 percent, according to the nation’s biggest real-estate website owner.

Property Investment

The growth in real estate investment slipped to 10.5 percent last year from 20 percent in 2013, according to today’s data, which was released at the same time as industrial output and retail sales figures. That trimmed the nation’s economic expansion by 1.1 percentage points, according to Haibin Zhu, chief China economist at JPMorgan Chase & Co. in Hong Kong.

“We expect the housing market adjustment to continue in 2015, but the momentum will soften and house prices may stabilize” in the second half of this year, Zhu wrote in a research note.

New property construction dropped 11 percent last year, the statistics bureau said today, reversing a 14 percent increase in 2013 and promising to ease an oversupply. The growth in unsold housing inventories slowed to 26 percent amid rising sales, down from 37 percent in 2013.

“Improving inventory and slowing new starts help construct a healthy housing supply-demand outlook,” Barclays’ Wong said. “Sales will continue to improve in 2015.”

— With assistance by Dingmin Zhang

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