More bad news from China’s housing market. Apartment prices fell in June in all but 15 of China’s 70 largest cities. That was the largest number of cities to see prices slide since January 2011, when the government changed how it measures the sector.
Prices in Shanghai and Guangzhou both declined 0.6 percent, while in Shenzhen they dropped 0.4 percent, China’s National Bureau of Statistics announced in a statement released today. The worst performer was Hangzhou, the capital of Zhejiang province, where prices were down 1.7 percent. The price drop comes amid a glut of excess apartments following years of runaway construction.
“The current biggest problem of China’s property industry is that the housing inventories are too high,” said Liu Li-Gang, chief Greater China economist at Australia & New Zealand Banking Group (ANZ:AU) in Hong Kong in a phone interview with Bloomberg News on Friday, July 18.
In an attempt to spur sales, cities are loosening property restrictions put in place when the market was still hot, reported the official Xinhua News Agency on July 18. Over the past few weeks, Hohot, Inner Mongolia, and Jinan, Shandong, began allowing nonresidents to purchase homes and made it easier to get mortgages. On July 14, Nanchang, Jiangxi, followed suit, dropping restrictions limiting purchases in several of its districts.
Changzhou, Jiangsu, which is facing a particularly serious glut, ran a front-page ad on its state-owned newspaper Tuesday exhorting its citizens to jump back into the property market. “Now is the best time to buy a home, as realty prices will not fall any further,” declared the Changzhou Daily.
Cities should use “all means” to reduce excess housing capacity, said China’s Housing Minister Chen Zhenggao in a recent meeting, reported the 21st Century Business Herald on July 18.
Growth in residential real estate investment in recent years has been twice as fast as gross domestic product growth and now amounts to 10.4 percent of the economy, or 5.89 trillion yuan ($949 billion), up from less than 2 percent of the economy in 1997, wrote Alaistair Chan, an economist at Moody’s Analytics (MCO), in a recent report on the market.