China’s housing prices fell for a fifth straight month in September, but a slowdown in the rate of the price slide holds out hope that the government’s spate of limited stimulus measures may be taking hold.
New data released yesterday by China’s National Bureau of Statistics reveals that the average price of new housing, including subsidized homes fell by 0.97 percent last month, despite efforts by the government earlier this year to remove policy restrictions on the real estate market, and more recently, to boost the availability of credit for potential home buyers.
The continued slide indicates that consumers remain skeptical of the housing market and are betting that home prices will continue to fall. However, the tapering speed of the price decreases, from -1.1 percent in August to -0.97 percent in September, at least holds out hope that the government’s efforts to stoke up demand may have begun to take effect.
Government Stimulus May Be Slowing Housing Decline
Since housing prices officially began falling in May this year, the authorities in Beijing have taken a number of steps to try to shore up demand and guard against knock-on effects that might damage the broader economy.
During the period from May through July, the stimulus efforts were focused on the removal of restrictive policies put in place to tamp down demand when housing costs were skyrocketing in 2011 and 2012. When the pace of decline in home prices continued to accelerate in June, July and August, despite these policy changes, the authorities quickly reached for financial measures to ensure that buyers had access to cash for home purchases.
Recent measures to reintroduce discounted mortgages for first-time buyers, and expand the pool of buyers eligible for mortgage financing may be helping, as shown in the chart of monthly rate of change in housing prices above.
The figures look slightly less encouraging on a year-on-year basis, as September 2014 average prices actually dipped below the rates recorded in the same month of 2013, meaning that an entire year of housing price gains has now been wiped out by the protracted slide.
Guilin Leads the Losers While Xiamen Holds Steady
While the fading rate of decline is encouraging, one less positive slide is the continuing spread of China’s real estate downturn, with 69 out of 70 of the cities surveyed now reporting drops in average home prices, and only Xiamen – which saw rates hold steady – so far remaining exempt from the trend. During August, 68 out of 70 cities had recorded falling prices.
While China’s largest and most developed cities, the so-called first-tier were not exempt from the housing decline, at least three out of the big four reported lower than average price slides, with Beijing going down by 0.75 percent, Shenzhen by 0.81 and Shanghai by 0.93. Guangzhou underperformed the market by recording a decrease of 1.35 percent in average home prices.
Even Hangzhou, which suffered the greatest decline in housing prices during August, with a dropoff of 2.1 percent from July, saw its fate improve slightly in September, with only a 1.17 percent slide being reported. The capital of Zhejiang province also saw its rank among cities nationwide improve markedly, with 19 other cities reporting worse declines than Hangzhou – a welcome respite after the city reported a year on year drop of more than 7.6 percent in average housing prices.
Waiting for the Turnaround
What this month’s data seems to show is what many analysts have long argued – that China’s housing bubble is slowly deflating – not collapsing. By applying some limited stimulus, the government has been able to slow the rate of decline in prices and prevent a rout of sellers.
That said, the fact that prices continued to decline shows the depth of conviction among buyers that prices still have further to fall.
Mingtiandi predicts that prices will continue to decline at least through the second quarter of 2015, with the rate of that decline depending largely on how dramatically the government wishes to intervene in the market.
Get More Information From Mingtiandi’s Interactive Table
For more details of how the 70 cities surveyed fared, please try out Mingtiandi’s interactive table below. You can filter by province or city tier, or sort by any of the columns.
|City||Index||Y-o-Y Difference||M-o-M Difference||City Tier||Province|
For a short intro on how the table works feel free to check out this 30-second video.