China’s new home prices fell significantly last month for a fourth straight month even as year-end sales volumes surged, a somber omen for last year’s fourth-quarter economic growth data due out later in the week.
The Chinese National Bureau of Statistics’ data released yesterday foreshadowed weak economic figures set for tomorrow, with expansion expected to slow to 7.2 percent, the weakest since the depths of the global financial crisis.
Falling property prices are likely to keep pressure on policymakers to head off a sharper slowdown this year.
The expected slowdown in growth of the world’s second-largest economy, from 7.3 percent in the July-September quarter, means the full-year figure would undershoot the government’s 7.5 percent target and mark the weakest expansion in 24 years.
If the GDP data proves worse than expected, some analysts say the People’s Bank of China (PBOC) could cut interest rates further or lower reserve requirement ratios for all banks.
A reserve ratio cut would give banks greater capacity to lend, but many market watchers question if they would be willing to increase their exposure as economic conditions deteriorate.
With real-estate investment accounting for about 15 percent of China’s GDP growth, a 9 percent decline in new floor space under construction in the first 11 months of last year could take a heavy toll.
“We expect China’s GDP growth to slow further in 2015 to 6.8 percent, as the ongoing property downturn leads to further weakness in construction and industrial production, and related investment,” UBS China economist Tao Wang (王濤) wrote in a note.
China’s real-estate market has been plagued by falling prices and high inventories in recent months, crimping demand in 40 economic sectors ranging from steel to cement to furniture.
The National Bureau of Statistics data showed last month’s new home prices fell an average 4.3 percent year-on-year in 68 of the 70 major cities it monitors.
However, in something of a policy success for Beijing, property sales volumes last month in 70 major cities hit the highest level seen in the year, up nearly 9 percent from November, according to bureau data.
Senior bureau statistician Liu Jianwei (劉建偉) said recent policy concessions, including November’s official interest rate cut and cheaper loans, had boosted home-buying interest as developers pushed year-end sales.
China Vanke Co (萬科), China’s top-listed residential developer, reported a 129 percent surge in sales last month from a year earlier, while sales over the same period for mid-sized Country Garden leaped 167 percent.
However, Wang Jun (王軍), senior economist at China Centre for International Economic Exchanges (中國國際經濟交流中心), a Beijing-based think tank, said: “The oversupply fundamentals of China’s property market have not been changed even though sales improved.”
“Developers are not so confident on the property market outlook. That’s why property investment growth continued to drop in the past months. No doubt the slowdown of the property market will continue to drag on the broad economy in 2015,” he said.
Property researcher CRIC concurred, saying housing supply remains excessive, despite the pick-up in sales, with only two major cities out of 23 it studied seeing a decline in inventory at the end of last month.
“In most Tier 2 or Tier 3 cities, inventory destocking remains the main task for local property markets in 2015,” said Liu Yuan, the head of research at Shanghai property consultant Centaline.
Yet despite falling prices and a stock overhang, several Chinese developers have said they would launch more housing projects this year as they strive to meet sales targets and boost market share — at the risk of adding to already-bloated inventories.
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