China's home prices dipped for the eighth straight month in May but the pace of decline eased, fanning talk that the market may be bottoming out and that recent monetary stimulus could set the stage for a rebound.
Home prices in the world's second-largest economy have fallen month-on-month since October, after China tightened policy more than two years ago to take the steam out of sizzling home prices.
Still, Beijing reaffirmed hours after the data it would keep property tightening measures in place, concerned that inflationary pressures are still a problem even as the broader economy slows.
Prices have declined but the cumulative drop is still mild, analysts say, keeping home prices near record highs and out of reach for the majority of China's burgeoning middle class. If Beijing moves to loosen restrictions now, it may mean the economy is slowing faster than expected.
"Housing prices are stabilizing or approaching the bottom," He Yifeng, economist at Hongyuan Securities in Beijing. "But we still cannot see any signs of rebounding."
Average new home prices fell 0.1 percent in May from a month earlier, narrowing from April's fall of 0.3 percent, according to Reuters calculations based on home price data in 70 cities published by the National Bureau of Statistics on Monday.
Only 40 cities saw new home prices fall in May from April, as compared with 43 in April, 46 in March and 52 — the most so far — in December.
The set of year-on-year data told a different story, showing the average new home prices dropped 1.5 percent in May. That marked the third straight month of decline, and compared with April's fall of 1.2 percent and March's dip of 0.7 percent.
A total of 54 cities suffered year-on-year home price declines in May, by as deep as 14.2 percent in Wenzhou, an eastern city seriously hit by private business failures in recent months due to external headwinds.
After the housing data, Chinese property shares reversed earlier losses, while Chinese developers listed in Hong Kong jumped.
The People's Daily, the mouthpiece of China's ruling Communist Party, said in an analytical report on Monday that many home buyers worry about a rebound in
property prices, as China has relaxed monetary policies, which changed market sentiment and boosted property sales since March.
"It seems home prices and tightening policies have reached their bottom so quite a few home buyers are starting to panic again," it said.
This is reminiscent of 2009 when prices doubled in several months after Beijing rolled out a 4 trillion yuan ($628.43 billion) stimulus package, the newspaper said.
China has relaxed monetary and fiscal policies after a more than two-year long property tightening campaign cooled the country's red-hot property market, at the same time as the euro zone debt crisis hit global financial markets and put a brake on domestic growth.
The central bank cut interest rates on June 7, the first such move in more than three years, after it lowered banks' reserve requirement ratio three times since November.
"Although these measures are not aimed at salvaging the property market, they are a shot in the arm for the cash-strapped real estate market," the People's Daily added.
Premier Wen Jiabao's government and its ministries have reiterated no change in its tightening stance for the real estate sector, which affects more than 40 other industries.
The latest confirmation of that policy came on Monday, in a Xinhua report that cited the housing ministry.
An unnamed spokesman from the housing ministry was quoted as saying that "all localities must firmly implement various property tightening measures as required by the central government."
But the weakening economy, likely to grow at its slowest pace in more than three years this quarter, is fuelling expectations that Beijing will probably have to relax property curbs if external headwinds worsen.
Reinforcing such expectations are local governments' steps to make it easier for first-time home buyers, by relaxing policies marginally so as not to irritate Beijing while stimulating local housing transactions.
Sales Pick Up
The semi-official China Securities Journal reported on Monday that transactions of new and existing homes combined rose 46.5 percent in Beijing in the first half of June as compared with the same period last year, citing data from the local housing bureau website.
The newspaper also cited local consultancy Home Link as saying that 21 of the 76 new property projects that hit the market so far this year recorded a rise in transaction prices.
However, high inventories will cap any quick rebound in home prices in the near term, it cited Home Link analyst Chen Xue as saying.
Vanke, China's largest developer by sales, said earlier this month it would take about 11 months to sell down unsold stocks in key cities such as Beijing, Shanghai and Shenzhen.
"I'm not worried about a home price rebound as long as the government keeps its tightening stance," Hui Jianqiang, head of research at the China Real Estate Association, told Reuters after the data.
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