China April home prices fall for second month as downtrend takes hold
BEIJING, May 18 — Chinese home prices fell in April for a second month in a row compared with year ago levels, as a downtrend takes hold in the market while the government has vowed to continue its more than two years campaign to make housing more affordable.
Average home prices in 70 major Chinese cities fell 1.2 per cent last month from a year earlier, after a 0.7 per cent fall in March, according to Reuters calculations from data published today by the National Bureau of Statistics.
The March decline was the first since Reuters began calculating the data in January 2011.
Prices fell 0.3 per cent month-on-month in April, for a seventh consecutive monthly decline.
“Chinese home prices still have room to fall further. The inventory level is very high right now,” said Jian Chang, an economist with Barclays Capital in Hong Kong.
A Reuters poll in April showed economists expected a further fall in home prices of 10 to 20 per cent in the April-December period, after a slip of 5 per cent in the first three months of the year.
China started its property tightening campaign, particularly curbing multiple home purchases, towards the end of 2009, after house prices surged in many cities and put home ownership out of reach for much of China’s burgeoning middle class.
Prices had been boosted in large part by a 4 trillion yuan (RM2 trillion) government stimulus package aimed at steering the economy clear of the global financial crisis.
Premier Wen Jiabao has since vowed repeatedly to drive home prices back to a reasonable level, aiming to ensure social stability during this year’s once-in-a-decade reshuffle of the Communist Party’s top leadership.
New home prices in April fell on a year-on-year basis in 46 of the 70 cities monitored by the bureau, indicating the falling trend was becoming widespread, while 43 cities saw declines in month-on-month terms.
Zhang Xiaohong, a senior official at the Ministry of Housing and Urban-Rural Development, said yesterday before the data was released that China’s real estate market would continue to correct in the next few months.
He affirmed the government would keep clamping down on property speculation while supporting owner-occupier demand, dashing expectations among investors that China may be ready to relax some curbs to bolster economic growth.
A recent series of economic indicators for April suggested that the economy may be slowing further in the second quarter rather than recovering from the first quarter’s 8.1 per cent annual growth rate - the slowest pace in almost three years.
New home prices fell the steepest in Wenzhou, an eastern city plagued recently by the failure of many private businesses, dropping 12.3 per cent in April from a year earlier.
Prices fell 1.0 per cent last month in Beijing and 1.3 per cent in Shanghai from a year earlier.
“Although the macro environment is not good, property policies will not be relaxed immediately,” Freddy Lee, chief executive of Chinese property developer Shui On Land Ltd , told Reuters in an interview yesterday.
“The government can speed up investment in many other sectors, or relax lending. But the money will not necessarily flow into the real estate sector,” he added.
Shui On Land, like many of its peers, has suspended plans to acquire new sites and will scale down the size of future projects to maintain its cash flow.
Many Chinese local governments, which badly need proceeds from land sales to repay maturing debts, have tweaked property rules to stimulate housing transactions while trying to avoid direct violations of Wen’s restrictions on multiple home purchases, which are at the core of the tightening campaign.
Some have so far won the central leaders’ consent, although efforts in Shanghai and a third-tier city of Wuhu were revoked within days.
Barclays’ Chang said some policy adjustments would occur to give isolated support to the property sector, but the main thrust would continue to be to rein in prices.
“Policy fine-tuning will continue to support owner-occupier demand and construction of ordinary homes,” Chang said. “But people should have some political sensitivity that China’s property tightening is still at a critical stage.”
Investor concerns about the downside risks in China’s economy have grown since data showed that growth in real estate investment slowed in April to a single-digit rate for the first time since the global financial crisis, adding to a flurry of other weaker-than-expected economic data.
Real estate investment accounts for 13 per cent of China’s gross domestic product and affects more than 40 other industries. — Reuters