Stocks, Economy No Drag on China Home Prices as Policy Loosened

  • New-home prices likely see rise in more cities in August
  • China has cut rates, eased home-purchase limits amid slowdown

China’s easing of home-purchase restrictions and interest-rate cuts are helping extend a recovery in housing prices even as the world’s second-biggest economy slows and the share market plunges.

New-home price gains in August spread to more cities of the 70 monitored by the government, official data on Friday is expected to show, according to analysts. Prices rose in 31 cities in July, exceeding those where they declined for the first time since April last year, underpinned by four rate cuts from November to June and the loosening of policies that had damped demand.

The government, which reduced rates again in August, has also loosened home-purchase rules for foreigners living in China and cut down payments for some homebuyers using public provident funds, a pool of cheaper mortgage loans provided by local governments. It is trying to boost fixed-asset investment that has been expanding at the slowest pace since 2000 and soften any impact on demand from a stock market rout that has wiped $5 trillion of value.

“The market is very policy driven and favorable polices for the real estate sector have kept being rolled out,” said Liu Yuan, a Shanghai-based research director for Centaline Group, China’s biggest property agency. “All of those consolidate the impression of government support and that underpins confidence.”

New-home sales in August rose for a fifth consecutive month, climbing 32 percent from a year earlier, according to the bureau of statistics. That indicates that the winding back of curbs helped sales recover during what traditionally is a slow time of the year, said Ma Qianli, a Shanghai-based analyst at property data and consulting firm China Real Estate Information Corp.

Price gains in July continued to be concentrated in first- and second-tier cities with limited supply. New-home prices in the southern business hub of Shenzhen increased more than 6.2 percent from the previous month, while they gained 1.6 percent in Shanghai and 1.1 percent in Beijing. 

Improving sales haven’t translated into a revival of real estate investments, which expanded 3.5 percent in the first eight months, the slowest pace since 2000. New housing construction starts declined 17 percent from last year, bucking a historical trend that shows construction usually picks up after home sales increase, said Du Jinsong, a Hong Kong-based analyst at Credit Suisse Group AG.

“Property investment has slid to single digits, even slower than during the financial crisis,” said Jeffrey Gao, a Hong Kong-based analyst at Nomura Holdings Inc. “It’s hard for investment to come back to the double-digit region. However, it signals that policy loosening, which is supporting sales, may continue.”