China Home-Price Gains Cool as Smaller Cities Impose Curbs

  • New-home prices gained in 51 cities in July versus 55 in June
  • The value of homes sales in July was the lowest since March

China Home Price Gains Cool in July

Chinese home prices gained in fewer cities as local governments joined some of the nation’s largest hubs in imposing residential property curbs to quell soaring real estate values.

New-home prices excluding government-subsidized housing gained in 51 cities last month, from 55 in June, among the 70 the government tracks, the National Bureau of Statistics said Thursday. Prices dropped in more cities for a fourth consecutive month, declining in 16, compared with 10 a month earlier. They were unchanged in three.

The figures show tightening measures are having an effect as they spread from larger hubs such as Shanghai and Shenzhen to smaller cities in a bid to tackle overheated home markets that have been buoyed by stimulus measures rolled out since November 2014. Nanjing, Jiangsu’s provincial capital, and Suzhou, a regional manufacturing base, last week raised down-payment requirements for some buyers of second residences, adding to restrictions introduced in Xiamen, a southern port city in Fujian province, and Hefei, the provincial capital of Anhui.

“The recent policy tightening could curb rapid home-price growth,’’ David Yang, a Shanghai-based analyst at UOB Kay Hian Investment Co., said before the data release. “Local policies will see further divergence as surging home prices and land costs trigger more tightening rules.”

Private data showed mixed signs. Prices in July gained in 66 cities among the 100 tracked by SouFun Holdings Ltd., the owner of China’s biggest property website, seven fewer than in the previous month. Average new-home prices rose 1.63 percent, quickening from the 1.3 percent pace in June.

Overheated Markets

“The price growth continued to abate,” the statistics bureau said in a statement released with the data, noting that most of the slower increases were in cities with an overheated housing market. The average new-home price rose 0.7 percent in July from June, broadly in line with the 0.71 percent increase in the previous month, according to Bloomberg calculations based on government data.

Price gains in some second-tier hubs cooled from record-high paces. Xiamen led gains in July with a 4.6 percent increase, slower than 4.7 percent in June. Values in Hefei rose 4.2 percent, slowing from 4.8 percent a month earlier. 

In Shanghai, prices climbed 1.4 percent, and they increased 2 percent in the southern business hub of Shenzhen from a month earlier, both at a slower pace after the cities unveiled curbs in March designed to rein in soaring home values and deter speculative purchases. They rose 1.7 percent in Beijing and 1.3 percent in the southern city of Guangzhou.

Growth Pillar

A slowdown in the property market may rob the economy of its biggest source of growth, Bloomberg Intelligence economists Tom Orlik and Justin Jimenez wrote in a note Thursday. Policy makers are struggling to smooth the real estate cycle as they try to achieve a delicate balance by calming speculative first-tier markets while driving more construction in smaller cities, according to Bloomberg Intelligence.

With rapid increases in land and home prices, top government officials are urging local authorities to impose housing-market controls. The red hot markets exposed the “failure” of local authorities in managing residents’ expectations, and they bear responsibility to ensure stable home markets with curbs, the official Xinhua News Agency wrote in a Wednesday commentary.

Such a “vigilant” attitude by top authorities suggests developers face more restrictions in fund raising and land bidding this year, which will weigh on the growth in real estate investment, said Xia Dan, a Shanghai-based analyst at Bank of Communications Co.

The pace of home sales has slowed sharply, indicating investing is tapering off. The value of homes sold rose 26 percent in July from a year earlier, according to Bloomberg calculations based on data the National Bureau of Statistics released Aug. 12. That was down from 71 percent in March.

Existing-home prices increased last month in 51 cities from the previous month, three more than in June. They declined in 16 cities and were unchanged in three.

— With assistance by Emma Dong

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