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China's house prices fall for the first time in 2011
November 18, 2011 - 4:15PM
China's average home prices in October ticked lower for the first time this year, official data showed on Friday, a victory in Beijing's fight against inflation but also a challenge if prices fall too sharply and stoke further social unrest.
Policymakers face a delicate balance as declining values of real estate investments have sparked protests in recent weeks by homeowners in Shanghai, Beijing and other cities, including some clashes that became violent.
"I think the government should start to be cautious about property prices over-correcting on the downside, as it will inevitably affect the economy," said Wee Liat Lee, regional head of property at ******* Securities (Asia), in a note to clients.
Friday's data showed that China's annual housing inflation cooled in October to its lowest in 2011 and nationwide average home prices fell from the prior month for the first time this year.
So far, Beijing has adeptly balanced its competing goals - maintaining healthy economic growth while pulling inflation back from a peak in July. At the heart of that effort are measures to restrict the rise of home prices, without setting off a hard-landing, and Premier Wen Jiabao has vowed to keep up pressure to curb housing prices.
Average house price inflation in China's 70 major cities dropped to 2.8 per cent last month from a year earlier, the lowest reading this year and down from September's 3.5 per cent, Reuters calculation of latest official data showed.
Average new home prices across China fell 0.2 per cent in October from September, the first drop since Reuters started calculating the weighted index after the National Bureau of Statistics (NBS) stopped publishing nationwide data in January.
"A downward correction in home prices has already started, and last month's figure further confirmed such a trend," said Hui Jianqiang, research head at E-House China, a real estate information provider.
The latest price data backed official figures released last week that showed property construction slowing across China, even though real estate investment remained buoyant.
The data indicated that measures taken by Beijing in the past two years to curb property speculation and cool the red-hot market are taking effect.
In Shanghai, new home prices fell 0.2 percent in October from the previous month, the first drop in 13 months.
Across China, new home prices fell in 33 of 70 major cities tracked by the NBS. Wenzhou, a boom town of private Chinese businesses, posted the steepest fall of 4.6 per cent.
Prices in 23 others were unchanged in October from September. During September, prices fell in 16 cities and stagnated in 30 others.
Compared with a year earlier, new home prices, including state-subsidised units, rose 1.7 per cent in Beijing in October and climbed 2.9 per cent in Shanghai. They rose by 1.8 per cent and 3.1 per cent respectively in September from a year earlier.
Regional relaxation
While noting the recent downward trend, Premier Wen reaffirmed earlier this month that Beijing would not loosen its property tightening measures until home prices return to reasonable levels.
That has triggered even wider and deeper price cuts and forced developers including Vanke and Evergrande Real Estate Group to slow their pace of expansion to protect cash flows.
A cooling land market also worries local governments as more than one-third of their revenues are derived from land sales.
"Real estate is a particular sensitivity for city governments," Nicholas Consonery, an analyst with Eurasia Group, said in a note to clients this week.
"Premier Wen has held the line so far, but given the fractious policy environment and the ongoing leadership transition, it is unlikely this steadfastness will hold," he said.
Consonery said he expects local governments to relax their property tightening measures in 2012 even though Beijing is unlikely to back off on its restrictions.
Beijing blocked an attempt by China's southern city of Foshan to relax the limits on the number of homes each family can buy in early October.
But it has since kept a blind eye to steps taken by several other cities and provinces to relax their mortgage rules and make it easier for buyers to borrow from local housing provident funds.
Reuters
November 18, 2011 - 4:15PM
China's average home prices in October ticked lower for the first time this year, official data showed on Friday, a victory in Beijing's fight against inflation but also a challenge if prices fall too sharply and stoke further social unrest.
Policymakers face a delicate balance as declining values of real estate investments have sparked protests in recent weeks by homeowners in Shanghai, Beijing and other cities, including some clashes that became violent.
"I think the government should start to be cautious about property prices over-correcting on the downside, as it will inevitably affect the economy," said Wee Liat Lee, regional head of property at ******* Securities (Asia), in a note to clients.
Friday's data showed that China's annual housing inflation cooled in October to its lowest in 2011 and nationwide average home prices fell from the prior month for the first time this year.
So far, Beijing has adeptly balanced its competing goals - maintaining healthy economic growth while pulling inflation back from a peak in July. At the heart of that effort are measures to restrict the rise of home prices, without setting off a hard-landing, and Premier Wen Jiabao has vowed to keep up pressure to curb housing prices.
Average house price inflation in China's 70 major cities dropped to 2.8 per cent last month from a year earlier, the lowest reading this year and down from September's 3.5 per cent, Reuters calculation of latest official data showed.
Average new home prices across China fell 0.2 per cent in October from September, the first drop since Reuters started calculating the weighted index after the National Bureau of Statistics (NBS) stopped publishing nationwide data in January.
"A downward correction in home prices has already started, and last month's figure further confirmed such a trend," said Hui Jianqiang, research head at E-House China, a real estate information provider.
The latest price data backed official figures released last week that showed property construction slowing across China, even though real estate investment remained buoyant.
The data indicated that measures taken by Beijing in the past two years to curb property speculation and cool the red-hot market are taking effect.
In Shanghai, new home prices fell 0.2 percent in October from the previous month, the first drop in 13 months.
Across China, new home prices fell in 33 of 70 major cities tracked by the NBS. Wenzhou, a boom town of private Chinese businesses, posted the steepest fall of 4.6 per cent.
Prices in 23 others were unchanged in October from September. During September, prices fell in 16 cities and stagnated in 30 others.
Compared with a year earlier, new home prices, including state-subsidised units, rose 1.7 per cent in Beijing in October and climbed 2.9 per cent in Shanghai. They rose by 1.8 per cent and 3.1 per cent respectively in September from a year earlier.
Regional relaxation
While noting the recent downward trend, Premier Wen reaffirmed earlier this month that Beijing would not loosen its property tightening measures until home prices return to reasonable levels.
That has triggered even wider and deeper price cuts and forced developers including Vanke and Evergrande Real Estate Group to slow their pace of expansion to protect cash flows.
A cooling land market also worries local governments as more than one-third of their revenues are derived from land sales.
"Real estate is a particular sensitivity for city governments," Nicholas Consonery, an analyst with Eurasia Group, said in a note to clients this week.
"Premier Wen has held the line so far, but given the fractious policy environment and the ongoing leadership transition, it is unlikely this steadfastness will hold," he said.
Consonery said he expects local governments to relax their property tightening measures in 2012 even though Beijing is unlikely to back off on its restrictions.
Beijing blocked an attempt by China's southern city of Foshan to relax the limits on the number of homes each family can buy in early October.
But it has since kept a blind eye to steps taken by several other cities and provinces to relax their mortgage rules and make it easier for buyers to borrow from local housing provident funds.
Reuters
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