New home prices in China rose last month at the slowest pace in seven months and fell or leveled off in more cities as government cooling measures dampened speculation, although there were no signs of a sharper correction that could damage the economy.
Signs of a more stable and less frothy housing market, which is a key driver of economic growth, would be good news for the Chinese Communist Party as it prepares for a key meeting next month.
Average new home prices in China’s 70 major cities rose 0.2 percent last month, half the pace of the previous month, Chinese National Bureau of Statistics data released yesterday showed.
It is the first time in three years that prices in the 15 hottest markets singled out by the bureau — mostly mega-cities and provincial capitals — have all stopped rising on a monthly basis after nearly six months of intensified controls, analysts said.
“The turning point for tier-1 and tier-2 cities has emerged,” Centaline Property Agency (中原地產代理) senior analyst Zhang Dawei (張大偉) wrote in a note.
The Hong Kong-listed shares of Chinese property developers jumped after the news.
China’s top three developers by sales — Country Garden Holdings Co (碧桂園), China Vanke Co (萬科) and China Evergrande Group (恒大集團) — rose 4.28 percent, 0.4 percent and 4.3 percent respectively.
“The data made investors a little more comfortable,” Gransing Securities Co Ltd (鼎成證券) investment strategy director Conita Hung (熊麗萍) said.
“The market was worried that China might step up tightening if home prices continued to rise... Now it was showed that the policies in place are effective and there’s less worry over further tightening,” Hung said.
Over the past year, more than 45 major cities have imposed restrictive policies of varying severity to curb fast-rising prices, with some forced into several rounds of tightening measures.
The steps have started to take some heat out of the market as sales growth has slowed from peak levels seen at the start of the year, but buyer demand appeared to be more resilient than expected.
The majority of the 70 cities surveyed by the bureau still reported a monthly price increase for new homes, although the number dropped to 52 last month from 61 in July.
Southern boomtown Shenzhen saw prices fall 1.9 percent from a year earlier, the first annual fall since March 2015, while its monthly decline further deepened to 0.4 percent from July’s 0.2 percent.
Prices in Shanghai and Beijing rose 2.8 percent and 5.2 percent respectively from the same period a year earlier, but were unchanged on a monthly basis.
However, the latest data showed that speculators are continuing to move into smaller cities with fewer controls.
Guilin, a smaller tier-3 city in southern China’s Guangxi Zhuang Autonomous Region, was the top price performer last month, rising 1.1 percent.
New home prices in tier-3 cities rose a faster-than-average 0.4 percent, but slowed from the 0.6 gain percent in July, the bureau said in a note accompanying the data.
Analysts say that China’s property market might become even more polarized in the next few months as falling inventories of finished homes could drive up prices in smaller cities, especially when the market enters the “golden September, silver October” peak sales season.
Nearly a third of Chinese households believe that housing prices will keep rising in the coming quarter, despite state moves to cool down the market, a survey by China’s central bank showed on Friday.
Analysts polled by Reuters expect China’s home prices to rise faster this year than previously estimated despite the flurry of government curbs introduced this year.
Compared with a year earlier, new home prices last month rose 8.3 percent nationwide, decelerating from July’s 9.7 percent gain, according to Reuters calculations based on the bureau’s survey.
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