Average prices for new homes, including subsidised housing, rose in 40 out of 70 cities in China last month, as the recovery in the country’s home market spread into more communities, according to data released this week by the National Bureau of Statistics.
Compared to August, September’s figures showed ten more cities reporting rising prices, while prices continued to drop in just 20 cities.
The encouraging news for the nation’s home industry comes after China’s government has taken repeated steps in recent months to encourage more sales, including lowering down payment requirements for buyers of additional homes at the end of August.
Despite the uptick in prices and more favorable regulations, however, home sales growth showed signs of levelling off in September, and purchases of new land by developers continued falling.
Tier One Cities Still Lead Price Increases
Although they have been largely excluded from the government’s recent easing of mortgage restrictions, China’s largest cities generally led price increases this month, as they have since prices first began recovering in April of this year.
Among the five cities reporting the greatest month-on-month increases in average home prices, four were first-tier cities, with the southern Chinese coastal centre of Xiamen the only second-tier community to sneak into the top five.
The city with the fastest growing prices was Shenzhen, which saw average prices jump by 4.01 percent in September, compared to August, while Shanghai reported a 1.60 percent increase, Guangzhou a 1.48 percent rise and Xiamen saw rates go up by 1.01 percent. Beijing had the fifth largest month on month increase in average prices at 0.97 percent.
In Shenzhen, which benefits economically from its close proximity to Hong Kong, average home prices are now up by 36.49 percent compared to the same period one year ago.
Across the 70 cities surveyed, the average month on month increase in prices for all new housing, including subsidised units was 0.20 percent – the sixth straight month that the bureau had reported rising prices.
Removal of Restrictions Helping Market Recover
September’s continuing recovery in the market comes after the government has taken a number of measures this year to rekindle a real estate industry that is estimated to contribute 15 percent of the nation’s GDP.
China’s government lowered downpayment requirements for buyers of additional homes from 30 percent to 20 percent at the end of August, for purchases of homes outside of the country’s first-tier cities. The move was seen as encouraging more investors to put their savings into housing.
And more price increases could be on the way when October’s results are tallied, as the government also lowered downpayment levels for first-time home buyers at the end of September, marking the third time that downpayment restrictions had been lowered so far in 2015.
The continued tweaking of purchase restrictions comes as China’s senior leadership continues to fret over GDP growth that slipped to 6.9 percent in the third quarter – the lowest rate since 2009.
New Investment Still Weak as Sales Growth Tapers Off
Despite the rising prices and policy encouragement, however, there are signs that China’s housing recovery remains weak, and developers are not yet convinced of the wisdom of taking on new projects.
At the same time as home prices were rising last month, growth in housing sales levelled off – staying at the same 15.3 percent month-on-month growth rate as August, in what is traditionally one of the busiest months for the property industry.
More importantly for the government’s economic targets, China’s rate of investment in real estate projects slid to a six-year low of 2.6 percent in September, as a large supply of unsold housing in many cities, combined with uncertain demand scared many developers away from new ventures.
China’s local governments, which typically rely on land sales for most of their revenue, also had some discouraging news this month as spending by developers on new sites fell by more than 33 percent compared to the same period last year.
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