China March Home Sales Surge in Property Investment Rebound

  • Real estate investment up 6.2 percent in the first quarter
  • Value of homes sold climbed to 869.8 billion yuan in March

China’s Property Sector Helps Spur Economy

China’s real estate investment staged a comeback with surging home sales, helping to stabilize economic growth in the first quarter. The credit-fueled rebound may be short-lived after some top cities imposed measures to cool the property market.

The value of homes sold jumped 71 percent in March to 869.8 billion yuan ($134.1 billion) in the biggest year-on-year increase since at least 2015, according to Bloomberg calculations based on statistics bureau data released on Friday. Investment in real estate development climbed 6.2 percent in the first quarter from a year earlier, extending the increase from the first two months when it reversed a two-year falling streak.

The pick-up, fueled by cheap credit, helped China’s fixed-asset investments jump 10.7 percent and gross domestic product to stabilize at 6.7 percent in the first quarter. The expansion, though, may not be sustainable as top-tier cities including Shanghai and Shenzhen have moved to rein in frenzied buying.

“We believe the stabilization is a short-term phenomenon, as property policy has been tightened in the major cities,” Zhou Hao, an economist at Commerzbank AG in Singapore, wrote in a note to clients after the data release, forecasting housing sales to slow down significantly in the coming quarters.

Important Pillar

The real estate industry is an important pillar for the Chinese economy, with UBS AG estimating that it accounts for more than a quarter of final demand in the economy if including goods used in construction. China’s continued recovery may depend on how much firepower is left from prior easing and whether its effect spreads beyond property and government-led projects.

The value of home sales rose 17 percent in March from the January-February period, where a combined 743.5 billion yuan of sales were delivered, according to Bloomberg calculations based on the data. The value of property sales including office buildings and retail space expanded by 54.1 percent to 1.9 trillion yuan from a year ago, the data showed.

Friday’s data added new evidence to the surging liquidity, which underpinned home sales. Aggregate financing totaled 2.34 trillion yuan in March, the People’s Bank of China said, far exceeding the median forecast of 1.4 trillion yuan in a Bloomberg survey. China has lowered benchmark interest rates six times since November 2014 and eased down-payment rules for both first homes and second residences, to revive real estate investments dragging the economic growth.

‘Fragile’ Recovery

The property recovery is expected to be more “fragile” than before, due to a large role played by financial factors including higher mortgage leverage, Harrison Hu, Chief Greater China economist at Royal Bank of Scotland Plc in Singapore, wrote in a note. “The newly imposed policy reins have already put a brake on transactions in first-tier and some second-tier cities, likely with contagion effects in the rest of the regions.”

Shanghai unveiled a package of measures designed to stem a surge in property prices in the metropolis, after new home prices soared 21 percent in February from a year earlier.

Home sales in China’s financial hub tumbled 60 percent as measured by area in the week after the municipal government on March 25 unveiled a package of tightening measures, including stricter approval criteria for non-resident homebuyers and higher down-payment requirements for second homes. The local government in Shenzhen, a city that has seen prices surge more than 50 percent in the past year, issued measures designed to curb speculative buying.

— With assistance by Emma Dong

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