Home prices in China showed signs of levelling off during August as growth in sales appeared to taper after several months of increase.
Average home prices across 70 cities in China, including subsidised housing, grew by just 0.17 percent in August compared to the previous month, according to a survey released on Friday by China’s National Bureau of Statistics.
The slowdown in price growth correlates with a decreasing rate of sales expansion revealed by the bureau earlier in the week, and could give pause to real estate developers deciding whether or not to gamble on new projects as land prices continue to rise in China.
China’s government has been working hard in recent months to rekindle the real estate industry as a source of growth, by relaxing purchase restrictions on new homes and lowering interests rates.
Expansion in Sales Growth Dropped By Half in August
The flattening out in prices comes as growth in sales of real estate nationwide for the first eight months of the year grew by just 1.1 percentage points in terms of floor space and 1.5 percentage points in terms of value compared to the results for January to July. By floor space, sales for the first seven months of the year had jumped by 2.2 percentage points compared to the period from January through June, and sales by value had increased by 3.4 percentage points.
While August is traditionally a slow month for housing sales, the sales figures published by the bureau compare sales for the first eight months of 2015 to the same period last year. The home price data compares average prices on both a month-by-month and an annual basis.
Slowing Sales in Synch with Policy Moves
The slowing growth in home sales may give some insight into the rationale behind the decision late last month by China’s Ministry of Land and Urban-Rural Development to lower down-payments on additional home purchases by households that already own at least one unit, from 30 percent to 20 percent in most cities in the country.
The removal of the home purchase restriction effectively welcomed a larger number of housing speculators back into the market, after the government had worked to push them out when prices were rising rapidly in earlier years. Also in August, China removed barriers to home purchases by foreign individuals and corporates, in another move seemingly aimed at propping up home sales.
The lowering of down-payment levels for speculators follows a similar move in late March which helped to push China’s home price growth back into positive territory in April for the first time in a year.
Reviving the real estate sector has become a higher priority for China’s policy makers following a sharp slide in the country’s stock market. Earlier in the year the country’s economic authorities had seemingly pinned hopes for reaching China’s growth goals on a wealth effect that could be created by pumping up the share market. Now with the stock market on a three-month downward spiral, maintaining growth in the housing market is more important than ever if China is to reach its target of 7.0 percent growth in GDP for 2015.
Investment Growth Continues Two-Year Slide
While the government’s policy measures so far this year have been successful in bringing more consumers back into the market, they have failed to stem a steady downhill slide in investment growth in the real estate industry.
During the first eight months of 2015 growth in investment in China’s property sector slid to 3.5 percent compared to the same period last year. The figures released last week are just the latest in two years of slowing growth for investment in the property sector.
To help encourage growth, the People’s Bank of China last month lowered interest rates for the fifth time since November, and cut reserve ratios at banks in an attempt to pump more credit into the economy.
While this latest round of rate cuts may help to lower costs for real estate developers, most companies remain unconvinced of sales prospects for housing in China’s smaller communities, while complaining of a lack of suitable sites – and prohibitive land costs in the country’s first-tier cities.
Getting to the Detail of China’s August Home Prices
For those of you looking for a deeper dive into the figures, the following table provides a city-by-city breakdown of China’s average home prices for August.
|City||Index||Y-o-Y Difference||M-o-M Difference||City Tier||Province|