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Home / Business / China's house price growth was weakest for almost a year, developers saw prices cut

China's house price growth was weakest for almost a year, developers saw prices cut



By Yawen Chen and Ryan Woo

BEIJING (Reuters) – China's new home prices grew at its slowest pace for almost a year in August as a cooling economy and existing sidewalks on speculative purchases put pressure on overall demand. [1

9659003] Watching for real estate bubbles, Chinese regulators have pledged to refrain from stimulating the real estate sector as they pursue measures to boost the broader economy that was hit by the Sino-American trade war and curb consumer demand.

Average new home prices in China's 70 major cities rose 8.8% in August from a year earlier, compared with a gain of 9.7% in July and the slowest pace since October 2018, according to Reuters from official data from the National Bureau of Statistics (NBS) on Tuesday.

monthly basis, average new home prices rose by 0.5% in August, less than July's 0.6% growth and the smallest increase since February. However, it still marked the 52nd straight month of gains.

Most of the 70 cities surveyed by NBS still reported monthly price increases for new homes, though the number was down to 55 from 60 in July.

The real estate sector has remained one of the few bright spots in the world's second largest economy.

China's real estate investment grew at its fastest pace in four months in August, data shows Monday, in contrast to a long-term slowdown in industrial production and investment.

But some analysts said the return on investment was probably due to developers rushing to meet government requirements before they could start selling on increasing funding pressure and worrying about the market's outlook, as regulators have made clear that oversight is only set to tighten .

Yang Yewei, a Beijing-based analyst at Southwest Securities, noted that some developers have chosen to cut prices, even though the government's tight control over new launches suggests they can't withstand big discounts.

A resilient real estate market has provided some cushion for the world's second-largest economy as politicians try to revive the hurting industrial sector and restore flags of consumer confidence amid an escalating trade war with the United States. [19659012] But the regulators are tight, as rapidly rising household debt and rising house prices have also deepened the fear of a sudden market correction and concern for affordable housing.

In a sign the government has made more hawkish about its housing policy as it manages to pump more credit into other areas of the economy, top Chinese leaders said in July that they would not resort to using the housing market as a form of short-term stimulus.

"The political impact of this meeting was in full swing in August," said Xia Dan, an analyst at China's Bank of Communications.

Slower price rises can give the government respite when they refrain from stimulating the property sector, but economists at Nomura expect some tougher measures to be eased around the end of 2019 as the economy's weakness becomes more pronounced.

"Any attempt to stabilize growth by stifling credit to the real estate sector may backfire," they said, noting the sector accounts for about a quarter of China's GDP.

Price trends have been mixed lately, with some cities showing signs of rapid cooling while others are still plagued with overheating risk.

In August, softer prices were mainly in tier-2 cities, which include most of the larger provincial capitals.

Property prices rose an average of 0.5% on a monthly basis, easing from a gain of 0.7% last month, the statistics agency said in a statement accompanying the data.

However, Nanning, the capital of the Guangxi Zhuang Autonomous Region of southern China, was the best price developer of the month, with prices rising 2.3% on a monthly basis.

China's four top cities – Beijing, Shanghai, Shenzhen and Guangzhou – had an average gain of 0.3% from a month earlier, unchanged from July.

Of the 70 largest cities the government tracks, inflation in the smallest tier-3 cities increased most on a monthly basis, although the 0.7% increase was also in line with the July pace.

China's average residential property prices are projected to rise 6% in 2019 from a year earlier, according to a Reuters poll released in August. The forecast was slightly higher than the 5% estimated in the last poll conducted in March, but is significantly slower than the 9.7% gain seen in 2018.

(Additional reporting from Lusha Zhang; Editing by Jacqueline Wong)


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