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Policy Changes Fuel Double-Digit Home Price Increases in China’s Biggest Cities

2015/05/19 by Michael Cole Leave a Comment

Home prices in China showed further promise of a recovery in the housing market during April following a barrage of stimulus from the government.

Chart by Visualizer

A survey of 70 of China’s largest cities by the National Bureau of Statistics showed that new home prices nationwide were essentially flat, while major centres such as Beijing and Shanghai appear to already be on the upswing.

The tapering off of China’s year-long slump leaves prices for homes including subsidised housing still lower than they were a year ago in every city except Shenzhen, but an increase in sales during April could give the country’s home builders renewed confidence.

Beijing and Guangzhou Show Double-Digit Increases

While the impact nationwide remains muted, the market in Beijing showed a sharp increase compared to March, with average prices in the capital rising 18.26 percent on a month to month basis to lead the nation. In Guangzhou home prices also jumped abruptly with the southern metropolis reporting a 13.15 percent increase in the month.

Chart by Visualizer

China’s other two first-tier cities revealed less buyer enthusiasm, with prices rising by 1.84 percent in Shenzhen and going up by just 0.61 percent in Shanghai.

The price growth in China’s biggest urban centres follows a series of measures by China’s central government to rekindle housing demand as the housing slump, and resulting slowdown in new investment by developers, has weighed on the economy. China’s economic growth is pegged to decline to 7.0 percent in 2015 after struggling to reach 7.4 percent in 2014 with many analysts pointing to the housing industry decline as a factor in the disappointing results.

To bring buyers back to the country’s housing projects in late March the central bank relaxed downpayment requirements for buyers of second or third homes from 60 to 40 percent in most markets. The friendlier policy toward wealthy buyers of multiple homes was probably the most significant change to date related to China’s housing industry.

The move, which reversed restrictive measures adopted during 2011, brought a large pool of wealthy buyers and speculators back into the market. The government also reduced some taxes and fees on housing transactions in March to revive the market.

In addition to the housing specific measures, China’s central bank has cut interest rates three times in the last six months in an effort to build demand for credit.

Lower Tier Cities Still Struggling With Double-Digit Drops

Looking at the nationwide average, the government policies appear to be working, Excluding subsidised housing, prices fell by 0.6 percent on a month to month basis, but a total of 18 cities saw prices increases and five cities reported no movement in prices.

CityIndexY-o-Y DifferenceM-o-M DifferenceCity TierProvince
Anqing102.5-6.48%-0.10%SecondAnhui
Baotou104.6-7.60%-0.19%ThirdInner Mongolia
Beihai105.3-6.81%-10.54%ThirdGuangxi
Beijing118.5-3.03%18.26%FirstBeijing
Bengbu99.9-8.52%-17.85%ThirdAnhui
Changchun107.7-6.02%-0.55%SecondJilin
Changde106.4-6.42%-0.56%SecondHunan
Changsha112.8-8.66%0.00%SecondHunan
Chengdu106.6-7.22%-0.09%SecondSichuan
Chongqing106.3-7.57%-0.19%SecondChongqing
Dali102.1-4.85%-0.49%ThirdYunnan
Dalian108.8-8.42%0.09%SecondLiaoning
Dandong107.2-9.31%-0.37%ThirdLiaoning
Fuzhou111.2-8.02%2.21%SecondFujian
Ganzhou107.9-6.50%-3.14%SecondJiangxi
Guangzhou122.2-6.00%13.15%FirstGuangdong
Guilin108.1-9.62%-0.18%SecondGuangxi
Guiyang109.6-3.94%-0.18%SecondGuizhou
Haikou97.3-6.44%-10.16%SecondHainan
Hangzhou91.7-10.45%0.44%SecondZhejiang
Harbin108.5-5.49%-1.45%SecondHeilongjiang
Hefei110.1-3.51%2.51%SecondAnhui
Hohhot106.9-7.84%0.85%SecondInner Mongolia
Huizhou105.2-9.00%-3.49%ThirdGuangdong
Jilin108.7-5.89%0.83%SecondJilin
Jinan107.8-5.93%10.34%SecondShandong
Jinhua98.1-6.48%-9.75%SecondZhejiang
Jining108.3-4.67%0.84%SecondShandong
Jinzhou106.8-9.03%3.29%ThirdLiaoning
Jiujiang103.1-6.61%-5.06%ThirdJiangxi
Kunming108.3-5.58%-1.28%SecondYunnan
Lanzhou110.8-4.89%5.73%SecondGansu
Luoyang109.2-6.98%-1.97%SecondHenan
Luzhou104.2-8.92%-4.75%ThirdSichuan
Mudanjiang109.2-3.62%-1.62%ThirdHeilongjiang
Nanchang111-6.49%5.71%SecondJiangxi
Nanchong104.7-7.75%-5.25%SecondSichuan
Nanjing110.8-2.81%3.94%SecondJiangsu
Nanning106.9-5.65%13.72%SecondGuangxi
Ningbo94.2-6.36%-10.88%SecondZhejiang
Pingdingshan108.6-6.06%0.56%SecondHenan
Qingdao100.7-9.20%-0.30%SecondShandong
Qinhuangdao107.3-7.26%7.73%ThirdHeibei
Quanzhou99.5-9.05%-1.68%SecondFujian
Sanya100.9-6.05%3.17%SecondHainan
Shanghai116.3-4.44%0.61%FirstShanghai
Shaoguan103.1-9.32%-0.48%ThirdGuangdong
Shenyang109.4-9.74%0.00%SecondLiaoning
Shenzhen127.30.87%1.84%FirstGuangdong
Shijiazhuang116.1-4.44%0.35%SecondHebei
Taiyuan110.3-5.16%0.18%SecondShanxi
Tangshan98.6-4.83%-0.20%SecondHeibei
Tianjin108.5-4.07%0.09%SecondHebei
Urumqi117.5-6.30%-0.34%SecondXinjiang
Wenzhou76.9-3.51%0.52%SecondZhejiang
Wuhan111.6-4.78%0.27%SecondHubei
Wuxi101.5-5.67%-0.10%SecondJiangsu
Xi’an110.2-5.65%-0.27%SecondShaanxi
Xiamen126.7-0.16%0.24%SecondFujian
Xiangfan107.4-7.57%-0.56%SecondHubei
Xining115.8-5.08%-0.17%ThirdQinghai
Xuzhou108.1-5.09%0.19%SecondJiangsu
Yangzhou104.7-7.10%-0.10%ThirdJiangsu
Yantai105-7.16%-0.19%SecondShandong
Yichang108.2-6.32%-0.46%ThirdHubei
Yinchuan108.8-5.80%-0.46%ThirdNingxia
Yueyang110.7-3.66%-0.18%SecondHunan
Zhanjiang108.5-8.82%-0.46%SecondGuangdong
Zhengzhou119.6-1.73%-0.17%SecondHenan
Zunyi107.6-5.70%-0.37%SecondGuizhou

Only 47 out of the 70 cities surveyed reported falling prices in April compared to 49 during March. However, some smaller cities in less developed areas have yet to feel the impact of interest rates or other policy changes.

Among the 16 third-tier cities included in the survey all but two reported falling prices compared to March, with Bengbu in Anhui province falling a precipitous 17.85 percent month on month.

Will April’s Sales Surge Be Sustained

Although China’s housing news of the last two months has showed a levelling off of the housing slump, the nation’s government is likely to be keeping a close watch on the housing market, which is said to account for as much as 15 percent of the nation’s economy.
The question following April’s results is how much of the recovery is due to the changes in the downpayment rules and whether the increase in buyer activity is likely to be a one off surge or a sign of increased sales volume on an ongoing basis.

Chart by Visualizer

Sales of new housing nationwide grew 16 percent in April compared to the same period of 2014 according to the Bureau’s figures. The new wave of buyer enthusiasm reflected a rapid shift from January and February this year when sales were declining on a year to year basis.

For the government to get the nation’s developers to continue investing in new projects it will have to convince real estate companies that buyers will keep coming and that new investment is a good idea.

Investment in new projects by China’s developers slowed to six percent in the period from January to the end of April, compared to the first four months of 2014. Many analysts remain concerned over how much housing remains unsold, particularly in the country’s lower tier cities.

 

 

 

 

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Filed Under: Research & Policy Tagged With: Beijing, China home prices, crebrief, housing price, National Bureau of Statistics

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