China house price growth slows as curbs take hold

Soaring price growth in China’s top cities has slowed almost to a standstill, as government measures to cool the overheated property market take hold.

Price growth of newly built homes in China’s “first tier” cities of Beijing, Shenzhen, Shanghai and Guangzhou slowed to 0.1 per cent in November compared with the previous month, the National Statistics Bureau said on Monday — well below month-on-month growth of 3-4 per cent seen in such cities earlier this year.

Over the past three months, the government has stepped up measures to cool the country’s housing market. More than 20 city governments passed restrictions making it harder to buy second homes and increased the minimum down payment required for a mortgage. Property developers have also been barred from pushing up land prices by borrowing to buy land.

Such measures appear to be having the desired effect of curbing price growth. Overall, prices of newly built and second-hand homes across 70 Chinese cities slowed in November compared with the month before.

At last week’s annual economic policymaking conference, Beijing said that cooling the property market was one of its top priorities for 2017, noting that “houses are for living in, not for speculating with”.

China’s property market, once hailed by Wang Jianlin, the country’s richest property tycoon, as “the biggest bubble in history”, is forecast by many analysts to go into reverse next year.

“[The price falls] are a result of the government’s extremely strict policy to curb house sales,” said Larry Hu, an analyst at Macquarie Capital, an investment advisory firm.

“Next year we’ll see [price falls] continue, with 5-10 per cent year-on-year declines in the top-tier cities [of Beijing, Shanghai, Shenzhen and Guangzhou],” added Mr Hu. Such falls would be a contrast with year-on-year price rises of more than 40 per cent seen in by such cities recently.

The price of new homes rose between October and November in 55 of the 70 cities tracked by the government, down from a rise in 62 cities during the previous month, the National Bureau of Statistics said on Monday.

Sales volumes are dropping more dramatically than prices. Floor space sold in the top-tier cities fell 17 per cent from the previous year in the first half of December, according to data compiled by NSBO China, a research firm.

Elly Chen and Stephen Cheung, analysts at investment bank Nomura in Hong Kong, expect sales volumes in cities across China to continue to fall 10 per cent year-on-year in 2017.

Although the government’s restrictions on housing demand are having their intended effect, the property market downturn risks dragging down growth for the economy as a whole.

“Property is the single most important sector in China. It relates to everything,” said Macquarie’s Mr Hu. “This [downturn] will hurt all other sectors, from construction to automobiles, which Chinese couples tend to purchase after buying their first house in the suburbs.”

Analysts expect that the government will step up infrastructure spending next year to ensure that a property slowdown does not detract from Beijing’s much-touted target of 6.5 per cent average economic growth from now until 2020.