China Home-Price Growth Slows as Home Curbs Start to Bite

  • Values gained in 62 cities in October, versus 63 in September
  • Prices in red-hot cities stabilized after curbs: government

Why China's Property Market Is Starting to Cool

China’s runaway property market cooled slightly in October, as authorities rolled out further home-buying curbs to deflate a housing bubble.

New-home prices, excluding government-subsidized housing, gained last month in 62 of the 70 cities tracked by the government, compared with 63 in September, the National Bureau of Statistics said Friday. Prices dropped in seven cities, compared with six a month earlier. They were unchanged in one.

Some local authorities have stepped up property curbs, following a raft of restrictions rolled out in almost two dozen cities since late September. Eastern Hangzhou, where Alibaba Group Holding Ltd. is based, ruled more non-local buyers ineligible last week, two months after halting purchases for some non-local residents. China’s banking regulator has told banks to review their mortgage lending and property development loans after China Minsheng Banking Corp. suspended approvals of some non-standard mortgages in Shanghai.

Home prices in first-tier and red-hot second-tier cities “apparently” stabilized in the second half of October after those regions announced fine-tuned curbs, the statistics bureau said. Five cities, from the capital Beijing to southern port city Xiamen, snapped a streak of price gains, the bureau said.

New-home prices in Shenzhen, the nation’s hottest property market earlier this year, fell 0.5 percent in October from September, the first decline in two years, the data showed. Prices in Beijing fell 0.4 percent in the second half of October, and declined 0.1 percent in Shanghai.

Market Standoff

Average new-home prices in the 70 cities tracked rose 1 percent in October from a month earlier, when they gained 1.8 percent, according to Bloomberg calculations based on the government data.

“Buyers and developers are now taking to the sidelines, creating a standoff in the market,” said Xia Dan, a Shanghai-based analyst at Bank of Communications Co.

A cooling of the property market may provide some relief to policy makers, who are seeking to avoid a housing bubble without denting economic growth. Even amid curbs in major cities, property development investment rose 13 percent from a year earlier in October, the most since at least 2015, according to Bloomberg calculations based on official data released Monday. New housing starts, an early indicator of real estate investment, gained 20 percent from a year earlier, the biggest increase since April.

China’s housing ministry has stepped up oversight of rogue players since early October, investigating developers and agents for alleged false advertising, urging probes on “illegal” sales and cracking down on investment by online finance and peer-to-peer lenders.

The drop in sales volumes in cities that have imposed restrictions was “a lot milder” than expected, said Liu Feifan, an analyst at Guotai Junan Securities Co. in Shenzhen. Sales dropped about 10 percent in those cities, compared with the brokerage’s prediction of more than 30 percent, he said.

“But momentum is going to slow further, otherwise authorities will step up curbs,” Liu said.

— With assistance by Emma Dong

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