China Home Price Growth Slows to Under 1% in November

Home prices in China’s largest cities continued to go into lock-down mode in November, according to data released over the weekend, as a months-long government crackdown continues to retard growth and snuff out sales.

Across 70 cities surveyed by China’s National Bureau of Statistics last month, new home prices rose an average of 0.9 percent compared to October, down from a growth rate of 1 percent the previous month.

The latest survey by the official statistics supplier comes five months after a battery of official entities, led by China’s Ministry of Housing and Urban-Rural Development (MOHURD), began tightening down restrictions on home purchases and government-controlled banks further reduced lending to the housing sector.

Largest All Look Frozen in November

New home prices in China’s four first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen rose an average of 0.3 percent from October, with Beijing and Shanghai witnessing growth of 0.6 percent and 0.5 percent, respectively. New housing prices in Guangzhou stayed unchanged while rates in Shenzhen slipped 0.2 percent on the government index.

In 31 second-tier cities, prices for new home prices climbed one percent in November, consistent with the growth rate during the previous month. New home prices in 35 third-tier cities climbed at a slower rate of 0.9 percent in November compared to a month earlier, down from 1.1 percent.

Analysts See Market at a Turning Point

“Tier-three cities that had previously supported the market are recently showing feeble growth and hotspot tier-one and two cities are gradually starting to cool overall,” Zhang Dawei, an analyst at Hong Kong-based real estate consultancy Centaline, wrote in a research note.

The brokerage also pointed out that property prices, for the first time in four years, appeared to be at a turning point in November as sales of existing homes had decreased in more than 10 leading cities for two consecutive months.

Prices of new homes slipped in five cities while 17 cities saw contractions in their existing home prices, with both totals exceeding their October numbers, the agency added.

Developers Brace for a Chilly Winter

As home sales have slowed since August, developers have revved up marketing campaigns and cash discounts to lure buyers. However, price discounts of up to 30 percent in some cases have generated occasionally violent protests by earlier buyers of full-price units in discounted projects.

Addressing the media on Friday, China Vanke chairman Yu Liang reiterated that the company’s new watchword is “Survival,” as the housing industry enters what the veteran developer sees as a prolonged slowdown. Yu underlined that China’s long-term regulatory tone has been set and that developers should not just wait for policy restrictions to be relaxed.

A Reuters poll of industry analysts published this past week found most respondents predicting that property investment would slow to four percent in 2019, while housing sales are expected to fall five percent amid slowing economic activity and tough financing conditions for smaller developers.

Regulatory Crackdown Seen Slowing

Although tightening finance, growing debt pressure and declining sales rates have causing trouble for mainland developers all year, Centaline pointed to a change in the regulatory regime.

The agency noted that the number of new regulations put in place for the sector decreased during November, with only the cities of Suzhou and Chengde introducing new buying curbs last month, while other cities refrained from bringing out new restrictions on the market.

On December 12th, the National Development and Reform Commission released a notice on its website entitled, “About supporting the quality enterprises’s direct fundraising to further strengthen their corporate bond’s ability to serve the real economy,” a change in financing policy for the industry, which many took as an encouraging sign.

According to the local Chinese media, the top-level planning body’s move was interpreted by the industry as a signal of relaxation after authorities had restricted developers’ financing options in recent months.