Home prices in China showed further promise of a recovery in the housing market during April following a barrage of stimulus from the government.
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.
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.
| City | Index | Y-o-Y Difference | M-o-M Difference | City Tier | Province |
|---|---|---|---|---|---|
| Anqing | 102.5 | -6.48% | -0.10% | Second | Anhui |
| Baotou | 104.6 | -7.60% | -0.19% | Third | Inner Mongolia |
| Beihai | 105.3 | -6.81% | -10.54% | Third | Guangxi |
| Beijing | 118.5 | -3.03% | 18.26% | First | Beijing |
| Bengbu | 99.9 | -8.52% | -17.85% | Third | Anhui |
| Changchun | 107.7 | -6.02% | -0.55% | Second | Jilin |
| Changde | 106.4 | -6.42% | -0.56% | Second | Hunan |
| Changsha | 112.8 | -8.66% | 0.00% | Second | Hunan |
| Chengdu | 106.6 | -7.22% | -0.09% | Second | Sichuan |
| Chongqing | 106.3 | -7.57% | -0.19% | Second | Chongqing |
| Dali | 102.1 | -4.85% | -0.49% | Third | Yunnan |
| Dalian | 108.8 | -8.42% | 0.09% | Second | Liaoning |
| Dandong | 107.2 | -9.31% | -0.37% | Third | Liaoning |
| Fuzhou | 111.2 | -8.02% | 2.21% | Second | Fujian |
| Ganzhou | 107.9 | -6.50% | -3.14% | Second | Jiangxi |
| Guangzhou | 122.2 | -6.00% | 13.15% | First | Guangdong |
| Guilin | 108.1 | -9.62% | -0.18% | Second | Guangxi |
| Guiyang | 109.6 | -3.94% | -0.18% | Second | Guizhou |
| Haikou | 97.3 | -6.44% | -10.16% | Second | Hainan |
| Hangzhou | 91.7 | -10.45% | 0.44% | Second | Zhejiang |
| Harbin | 108.5 | -5.49% | -1.45% | Second | Heilongjiang |
| Hefei | 110.1 | -3.51% | 2.51% | Second | Anhui |
| Hohhot | 106.9 | -7.84% | 0.85% | Second | Inner Mongolia |
| Huizhou | 105.2 | -9.00% | -3.49% | Third | Guangdong |
| Jilin | 108.7 | -5.89% | 0.83% | Second | Jilin |
| Jinan | 107.8 | -5.93% | 10.34% | Second | Shandong |
| Jinhua | 98.1 | -6.48% | -9.75% | Second | Zhejiang |
| Jining | 108.3 | -4.67% | 0.84% | Second | Shandong |
| Jinzhou | 106.8 | -9.03% | 3.29% | Third | Liaoning |
| Jiujiang | 103.1 | -6.61% | -5.06% | Third | Jiangxi |
| Kunming | 108.3 | -5.58% | -1.28% | Second | Yunnan |
| Lanzhou | 110.8 | -4.89% | 5.73% | Second | Gansu |
| Luoyang | 109.2 | -6.98% | -1.97% | Second | Henan |
| Luzhou | 104.2 | -8.92% | -4.75% | Third | Sichuan |
| Mudanjiang | 109.2 | -3.62% | -1.62% | Third | Heilongjiang |
| Nanchang | 111 | -6.49% | 5.71% | Second | Jiangxi |
| Nanchong | 104.7 | -7.75% | -5.25% | Second | Sichuan |
| Nanjing | 110.8 | -2.81% | 3.94% | Second | Jiangsu |
| Nanning | 106.9 | -5.65% | 13.72% | Second | Guangxi |
| Ningbo | 94.2 | -6.36% | -10.88% | Second | Zhejiang |
| Pingdingshan | 108.6 | -6.06% | 0.56% | Second | Henan |
| Qingdao | 100.7 | -9.20% | -0.30% | Second | Shandong |
| Qinhuangdao | 107.3 | -7.26% | 7.73% | Third | Heibei |
| Quanzhou | 99.5 | -9.05% | -1.68% | Second | Fujian |
| Sanya | 100.9 | -6.05% | 3.17% | Second | Hainan |
| Shanghai | 116.3 | -4.44% | 0.61% | First | Shanghai |
| Shaoguan | 103.1 | -9.32% | -0.48% | Third | Guangdong |
| Shenyang | 109.4 | -9.74% | 0.00% | Second | Liaoning |
| Shenzhen | 127.3 | 0.87% | 1.84% | First | Guangdong |
| Shijiazhuang | 116.1 | -4.44% | 0.35% | Second | Hebei |
| Taiyuan | 110.3 | -5.16% | 0.18% | Second | Shanxi |
| Tangshan | 98.6 | -4.83% | -0.20% | Second | Heibei |
| Tianjin | 108.5 | -4.07% | 0.09% | Second | Hebei |
| Urumqi | 117.5 | -6.30% | -0.34% | Second | Xinjiang |
| Wenzhou | 76.9 | -3.51% | 0.52% | Second | Zhejiang |
| Wuhan | 111.6 | -4.78% | 0.27% | Second | Hubei |
| Wuxi | 101.5 | -5.67% | -0.10% | Second | Jiangsu |
| Xi’an | 110.2 | -5.65% | -0.27% | Second | Shaanxi |
| Xiamen | 126.7 | -0.16% | 0.24% | Second | Fujian |
| Xiangfan | 107.4 | -7.57% | -0.56% | Second | Hubei |
| Xining | 115.8 | -5.08% | -0.17% | Third | Qinghai |
| Xuzhou | 108.1 | -5.09% | 0.19% | Second | Jiangsu |
| Yangzhou | 104.7 | -7.10% | -0.10% | Third | Jiangsu |
| Yantai | 105 | -7.16% | -0.19% | Second | Shandong |
| Yichang | 108.2 | -6.32% | -0.46% | Third | Hubei |
| Yinchuan | 108.8 | -5.80% | -0.46% | Third | Ningxia |
| Yueyang | 110.7 | -3.66% | -0.18% | Second | Hunan |
| Zhanjiang | 108.5 | -8.82% | -0.46% | Second | Guangdong |
| Zhengzhou | 119.6 | -1.73% | -0.17% | Second | Henan |
| Zunyi | 107.6 | -5.70% | -0.37% | Second | Guizhou |
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.
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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