China’s Oct. property investment solid, but risks seen from curbs

BEIJING — China’s real estate investment growth quickened in October to its highest since April 2014, but analysts say stepped up measures to curb a redhot housing market might ultimately hurt an economy that has only recently started to stabilize.

Property investment rose 13.4% in October from a year earlier, compared with 7.8% growth in September, according to Reuters calculations based on data issued by the National Bureau of Statistics (NBS) on Monday.

For the first ten months of the year, property investment grew 6.6%, accelerating from 5.8% in January-September.

The data suggested real estate developers have yet to feel any notable pressure from recent measures to curb speculative home purchases, possibly because of a push to finish construction projects as home sales volumes have shown signs of declining.

Analysts noted that the impact of tightening measures on investment is usually delayed, cautioning that economic growth momentum might slow next year as government curbs bite.

“The impact on investment figures will probably show later as sales are usually hit first,” said Wendy Chen, a Shanghai-based economist at Nomura.

“But we think the property market will not be able to play such a supportive role for the economy from early next year.”

New construction starts — a highly volatile number measured by floor area — in October were up 19.9% from a year ago, after dropping 19.4% in September, Reuters calculations showed.

China has depended on a red-hot real estate market and government infrastructure spending to drive growth this year as demand at home and abroad flagged, and factory overcapacity weighed on output.

Growth in the Asian giant has recently shown signs of stabilizing, but frenzied demand for homes has fed fears of a property market crash and a hard landing for the economy, prompting Beijing to impose a range of curbs over the last few months.

NBS Spokesperson Mao Shengyong predicted that property investment will accelerate or remain at current levels for the rest of the year, due to a low-base effect.

TIGHTENING IMPACT

Analysts say broad demand will be hit as the authorities grapple with the tricky balance of supporting the real estate sector — a critical driver of economic growth — and preventing asset bubbles.

Indeed, data from the NBS for 15 first- and second-tier cities which implemented new measures during the holiday, including Beijing, Tianjin, Shanghai and Shenzhen, showed signs of cooling in the first half of October on a monthly basis.

On top of higher downpayments and bans on second-home purchase, China has also made it harder for property developers to issue bonds, which has discouraged real estate firms from raising funds for new constructions.

The impact was already evident in a sharp slowdown in bank loans. Data on Friday showed 651.3 billion yuan ($95.56 billion) in net new yuan loans in October, plummeting from September’s 1.22 trillion yuan, as policy makers pledged to prevent asset bubbles in the increasingly debtfueled economy. —