The government’s efforts to rein in runaway real estate prices in China continued to have an impact in January as the latest data show that average new home prices across the country dropped 0.2 percent compared to December.
The fall in prices stretched across the nation with none of the 70 cities monitored by the National Bureau of Statistics posting increases during the month.
While prices remain higher than they were in January 2011, it is clear that the market is beginning to heed repeated statements by Premier Wen Jiabao and other leaders that they will persevere in bringing property prices in line with popular buying power. This determination on the part of the central government was made doubly clear last week when the city of Wuhu was forced to quickly reverse its attempts to relax restrictions on real estate sales.
The January decline follows a price decrease of 0.3 percent in December and 0.2 percent in October and November according to a real estate index from Reuters.
Here are some other key points from the January National Bureau of Statistics data:
- Real estate prices fell month on month in 47 of the 70 cities monitored
- In the 23 remaining cities property prices remained unchanged
- New home prices were still up in 53 of the cities, and down in 14.
- Wenzhou suffered the sharpest fall in new home prices in January, dropping 0.6 percent from a month earlier and 7.6 percent from a year earlier. (Time to sell the Ferrari)
- Real estate investment grew 12.3 percent in December from a year earlier, compared with rises of more than 30 percent in the early months of 2011
Perhaps most importantly, this was the first time since the government began restricting the property market that none of the cities surveyed recorded a month on month price increase.
While the halt to price increases shows that the government is attaining its goals, don’t expect policies to be reversed anytime soon. Following the release of the data Bloomberg’s Bonnie Cao spoke with Alan Jin, a real estate analyst with Mizuho Securities in Hong Kong who noted,
“The falling downtrend of home prices will strengthen in coming months as the government tightening continues. The figures won’t prompt the central government to release the curbs any time soon, because it probably would like to observe and study the market further.”
While some are hopeful that the government could change direction mid-year, in the absence of serious economic problems, Mingtiandi’s bet is on the current rules staying in place until after the party meetings this autumn.