Home Price Growth Slows to 6.7% As China Real Estate Slide Continues

Official figures released this week indicate that housing prices in China continue to cool down, although a majority of the country’s largest cities still see prices rising.

According to the latest survey by China’s National Bureau of Statistics, average home prices rose 6.7 percent during April compared to the same period last year, slowing from the 7.7 percent growth recorded during March.

The price drop comes as many areas of the country, including prosperous Zhejiang province in eastern China have seen developers introduce steep discounts on new home sales in an effort to thaw buyer sentiment.

The spread of discounting was reflected in the number of cities that saw month to month price decreases, which doubled from four cities in March to eight cities in April. Hangzhou led the price slide with a 0.7 percent drop, followed by Huizhou in Guangdong, Jinhua in Zhejiang, Ganzhou in Jiangxi, Wuxi in Jiangsu, Anqing in Anhui, and Ningbo and Wenzhou in Zhejiang.

Fewer cities were able to achieve increases in housing prices last month with only 44 out of 70 reporting monthly price growth, compared to 56 during March.

Economists Warning of Danger to China’s Economy

Just last week economists for JP Morgan Chase and ING both warned of risks to the nation’s economy.

Zhu Haibin, chief China economist with JP Morgan Chase told the media that although home prices are not likely to collapse in all cities, the real estate slowdown represents the biggest macro risk to China’s economy.

In a separate report, Maarten-Jan Bakkum, Senior Emerging Market Strategist at ING Investment Management saw China’s real estate issues hurting the economy’s competitiveness internationally. “China currently has the weakest growth momentum of all emerging economies,” he said. “In particular sales and price dynamics in the real estate sector continue to be outright negative.”

While this week’s figures from the National Bureau of Statistics don’t reveal a bursting real estate bubble, the pockets of price decreases that they reveal are certain to be a concern to policymakers struggling to ensure affordable housing for the country’s populations while supporting an economy that has grown dependent on the property sector.