China Home Prices Continued to Cool in October

China’s real estate market continued to cool off in October with growth in home prices slowing in the face of the government’s determination to stick with its fight against housing speculation despite a slowing economy.

50 of 70 mainland cities tracked by the National Bureau of Statistics saw prices grow last month, down from 53 in September, and the lowest count since February 2018. In two of the country’s four largest cities home prices fell in October compared to September, as China’s first-tier cities averaged just 0.1 percent increases in prices — down from 0.4 percent the previous month.

The slowing price growth during what would normally be one of the busiest months for developers dims any hopes that homebuilders might still harbour about a possible loosening of policy controls and lending which has slowed the property market since mid-2018.

Annual Price Growth Falls Below 5%

Among China’s first tier cities, home prices grew an average of 0.4 percent last month in both Shanghai and Shenzhen, but Beijing saw prices fall by 0.2 percent and Guangzhou slid by 0.1 percent as regulators kept the country’s largest markets in check. Compared with the same period last year, new home prices in first tier cities rose 4.7 percent — a drastic change from some of the double-digits rates of annual growth seen in earlier years.

Conditions were slightly better in the mainland’s second tier cities, where prices grew by 0.5 percent on average, but even this group, which includes major centres such as Hangzhou, Nanjing and Chengdu, price growth was down 0.1 percentage point from the 0.6 percent expansion recorded in September. On an annualised basis, home prices rose 8.7 percent compared to October 2018.

Third tier cities, the smallest-sized communities tracked by the government index, saw 0.6 percent growth in home prices on average, as the government focuses its policy clampdown on major cities. The city of Xining, a two million person community in Guangxi province had the highest rate of growth in the survey at 2.8 percent, but overall increases in average home price growth in third tier cities slowed by 0.2 percentage points in October, compared to September.  The third tier cities included in the survey registered year on year growth of 7.7 percent in home prices.

Real Estate Investment Continues to Slow

The slowdown in price growth has reduced the level of home buying urgency among the Chinese public, and also has had an impact on development activity and sales by builders.

Real estate investment growth slid from 10.5 percent in September to just 8.8 percent last month, according to a Reuters report, based on the Bureau of Statistics report on activity during the first 10 months of the year. The government bureau showed that property investment growth from January through October reached 10.3 percent — down from 10.5 percent growth during the period through September.

The slowing rate of developer investment paralleled slowed sales, with the volume of floor space sold rising just 1.9 percent in October —  down from 2.9 percent in September. Property sales for the first ten months of 2019 were just 0.1 percent more than the number of square metres sold during the same period of 2018.