China mart shows signs of softening
SLOWER PRICE GROWTH: Government measures to curb speculative buying starting to bite
CHINA’S booming property market showed early signs of a softening last month after a fast and furious price rally that propped up economic growth this year.
A National Bureau of Statistics (NBS) survey out recently showed last month’s monthly price growth virtually halved to 1.1 per cent from September’s 2.1 per cent, as most of China’s first- and second-tier cities posted slowing price growth.
Analysts welcomed the softening as it showed that local and national measures intended to curb speculation were working without seeming to trigger a sharp price correction.
“Last month’s data showed the momentum is softening and that is within market expectations,” said Julia Wang, Greater China economist at HSBC global research in Hong Kong.
“I think that’s actually good news since it showed the effectiveness of the new curbs introduced earlier last month without depressing the market too much.”
Despite the monthly slowdown, new house prices in China’s 70 major cities still rose 12.3 per cent last month from a year earlier, accelerating from an 11.2 per cent increase in September.
Prices in Shenzhen, one of China’s long-time high-growth markets, dropped 0.5 per cent last month, the first fall since October 2014, suggesting restrictions to curb speculative buying in the hottest markets are starting to bite.
China has depended on a surging real estate market and government stimulus to drive growth this year, but fears of a property market crash have led more than 20 cities to introduce tightening measures to cool overheating markets. House prices in Shenzhen, first fall since October 2014.
HSBC’s Wang said the impact of tightening measures on growth would be “limited” as the policies were still more relaxed than seen in previous tightening cycles, especially without a credit squeeze from monetary tightening.
“We expect monetary policy to remain loose next year,” she said.
Wang estimated the property market currently contributed 17 per cent of China’s total investment, with infrastructure spending still the major driver.
Property investment rose last month on an annual basis to its highest since April 2014, according to Reuters calculations from data issued by NBS last Monday.
Analysts say the impact on realestate investment from tightening measures is usually delayed, but a property market dampened by sluggish domestic demand could weigh on the economy from early next year, adding uncertainty to the growth outlook.
Sixty-five of the 70 cities tracked by NBS showed a year-on-year price gain, up from 64 in Septem- ber. In the second-tier city of Hefei, once again the top price gainer, new house prices rose 48.4 per cent last month, quickening from a 46.8 per cent surge in September.
Analysts said a record headline figure last month suggested policymakers would maintain measures to bear down on price growth.
“The current strict policy tone will persist, which could add pressure to growth in the coming quarters,” said Singapore-based Commerzbank economist Zhou Hao. Reuters