Tags: china | housing | price

China Home Prices Fall Further on Government Curbs

Sunday, 18 March 2012 01:19 PM

China’s February home prices posted the worst performance in a year, with almost half of the cities monitored by the government falling from a year ago as the country maintained curbs on the property market.

New home prices fell in 27 of 70 cities last month from a year earlier and prices were unchanged in six cities, the national statistics bureau said in a statement on its website. That is the worst since the government began at the start of 2011 releasing individual data for 70 cities instead of a national average.

Premier Wen Jiabao said last week housing prices remain far from a reasonable level and called on the government not to slacken efforts to regulate the home sector. Relaxing the curbs could cause “chaos” in the market, Wen said. China’s two-year campaign to rein in home prices has included measures such as higher down payments and mortgage rates, and home purchase restrictions in 40 cities.

“China’s home prices fell further, but it doesn’t mean there will be a policy loosening any time soon,” said Qu Hongbin, a Hong Kong-based economist at HSBC Holdings Plc in a phone interview. “The government is not worried too much about the impact of a slowing property market on economic growth because investment in social housing will still be big.”

Home prices will need to see a “meaningful correction” by falling 20 percent to 30 percent from last year’s peak before the government relaxes policies on property, Qu said.

Wenzhou Prices

The eastern city of Wenzhou posted the biggest drop for the fourth month, with home prices declining 0.5 percent from January and 8 percent from a year earlier, according to National Statistics Bureau data. A credit squeeze on smaller businesses in the city prompted Wen to visit in October and pledge financial aid.

Among major cities, home prices in both Beijing and the financial center of Shanghai fell 0.4 percent last month from a year ago. In the south, Shenzhen declined 0.2 percent, while Guangzhou rose by 0.3 percent from 2011.

Prices fell in 45 cities last month from January, while 22 cities were unchanged, the statistics bureau said in the statement. That compares with 47 cities recording a decline in January from December. New home prices in Shanghai, Beijing, Shenzhen and Guangzhou, considered first-tier cities, dropped for a fifth month.

Only the northern city of Baotou, the eastern city of Jinan and northwestern city of Xining posted gains of 0.1 percent in home prices in February from the previous month. In January, no city posted gains for the first time in a year.

Beijing, Shanghai

China is targeting a 7.5 percent expansion in gross domestic product this year, down from the 8 percent goal in place since 2005. The government plans to build 7 million units for social housing this year.

February new home prices in Beijing fell 0.1 percent from January, while in Shanghai, and the southern business hubs of Guangzhou and Shenzhen they declined 0.2 percent.

The figures came after private data also showed the home market continued to cool. China’s February home prices posted the biggest decline in 19 months, according to SouFun Holdings Ltd., the nation’s biggest real estate website owner.

China Vanke Co., the country’s largest publicly traded developer, said contracted sales in the first two months fell 27 percent from a year earlier, while they slumped 31 percent at Poly Real Estate Co., the second-biggest developer traded on Chinese exchanges.

“With more supply coming in spring, prices will fall further,” said Lan Shen, a Shanghai-based economist at Standard Chartered Plc. “We see some easing of mortgage policies, but any sort of such fine-tuning will have a limited impact of the market.”

Existing Homes

Agricultural Bank of China Ltd., the country’s third- largest lender by assets, offered discounts of 15 percent on mortgages for first-home buyers in Shanghai, Oriental Morning Post reported on March 14, citing unidentified officials from the lender. Other banks in the city gave 10 percent, the newspaper said.

Existing home prices in both Beijing and Shanghai dropped 0.2 percent from January, according to the statistics bureau.

“The current administration will not relax the overall tightening stance on the housing market,” wrote Barclays Capital Asia Ltd. economists led by Jian Chang in a note to clients on March 14. “We expect a further decline in property prices, especially in major and coastal cities.”

The country’s home sales declined 25 percent in January and February, according to data from the statistics bureau on March 16. The value of homes sold fell 25 percent after surging 26 percent in the first two months of 2011.

Home prices may post a “single-digit” decline this year, billionaire developer Vincent Lo, chairman of Shui On Land Ltd., said in an interview in Beijing on March 8. The housing market will not see a crash, he said.

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Sunday, 18 March 2012 01:19 PM
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