China’s Housing Statistics Join the Struggle Against the Bubble

For the first time ever, the National Bureau of Statistics released data mid-month as the keeper of China’s economic figures painted a picture of cooling home prices in its survey of average housing markets in 70 leading cities across the country.

The mid-month statistics on average housing prices for October were released together with the bureau’s September’s figures that saw China’s new home prices post their biggest monthly gain this decade.

The results of the October data are a bit abstract, more Picasso than Rembrandt, with home prices in some cities showing signs of cooling and others simply taking a smaller step in the first half of October compared to the leaps witnessed during the full month of September.

In some of China’s biggest markets the government’s themes were clearly upheld, with housing prices in Shenzhen, including subsidized housing, falling 0.3 percent between the end of September and the middle of October. This decimal point step upward comes after the market had risen more than 51 percent in the last year. In Shanghai, price growth slowed to 0.7 percent during the first half of October, after the market had jumped 2.7 percent in September from August.

The soothing market imagery was less clearly illustrated in second tier cities such as Wuxi and Zhengzhou, however, where home prices still grew by more than four percent from the end of September through mid-October. The October price increases in Wuxi came despite the government raising the bar for down-payments on second homes to 40 percent from 30 percent on the first day of the month.

To clear up any misunderstandings, the NBS’ Liu Jianwei declared the housing bubble under control in the country’s biggest markets. “The data shows the rapid price gains in the 15 first-tier and hot-spot second-tier cities have been curbed effectively. Prices are stabilizing,” the government economist said in an official statement.

September Scorches Second Tier Housing Markets

Much like August, several second and third tier cities recorded a significant spike in home prices in September. Wuxi, just west of Suzhou, had the largest home price increase at 8.2 percent, according to the NBS data. This jump came one month after prices rose 4.9 percent in the city of more than 6.3 million people.

Zhengzhou, which had been the big gainer in September, could only come in second to Wuxi in September. Still the price of homes in the capital of Henan province was racing like a Beijing taxi driver approaching a yellow traffic light — rising by 7.5 percent last month, and the market is now up 24.5 percent in the past year.

Hangzhou in Zhejiang province, Fuzhou in Fujian, and Jinan, the capital of Shandong province, all recorded home price growth of more than five percent in September. Overall, 63 of the 70 cities monitored by the NBS posted an increase last month.

What If the Brakes Don’t Work?

At least 21 cities in China have introduced property curbs in an attempt to prevent a bubble that Wanda chairman Wang Jianlin predicted described as the biggest in history. While the curbing measures vary by city, they generally include higher down payment requirements and restrictions on purchases of second and third homes. However, experts aren’t sold on how effective they will be.

“These curbs only aim to rein in the home-buying panic and to stem the bubble, instead of being an all-round shackling on the property market,” Wang Tao, chief China economist at UBS Group AG in Hong Kong, told Bloomberg. “The most powerful property control is credit tightening, which we haven’t seen. The purchase restrictions currently imposed can still be bypassed.”