Bloomberg News

China’s October Home Sales Fall 25% on Harsher Measures

November 09, 2011

(Updates with analyst’s comment in fifth paragraph.)

Nov. 9 (Bloomberg) -- China’s October housing transactions fell for the first time in three months, declining 25 percent from September as the government intensified measures this year to curb gains in residential prices.

The value of homes sold last month dropped to 372.3 billion yuan ($58.7 billion) from 493.9 billion yuan in September, based on data from the statistics bureau. Housing sales from January to October climbed 16 percent to 3.6 trillion yuan from a year earlier, the government agency said today.

“The government’s property policies are working,” said Johnson Hu, a Hong Kong-based property analyst of CIMB-GK Securities Research. “Even in the so-called peak season of October, sales are coming down. But for the near term, it’s unlikely the government will relax the policies and the data throughout the year will remain quite volatile.”

China’s home prices retreated for a second month in October, according to SouFun Holdings Ltd., as the government this year increased down-payment requirements and mortgage rates on some homes and imposed housing purchase restrictions in about 40 cities. Premier Wen Jiabao said a week ago the government will “firmly” maintain its control over the property market even as it seeks to “fine tune” other economic policies.

Reversing Policies

“If the property sector heads down significantly, policy changes will kick in down the road,” said Zhang Zhiwei, a Hong Kong-based economist for Nomura International (Hong Kong) Ltd. “I do see some downside risks, but the policy reverses may not come as early as in the next two months, as Premier Wen stated it pretty clearly.”

Zhang, who maintained his forecast for the economy to expand 8.6 percent next year, expects housing investments by both the private and public sectors to ease in 2012.

Chinese developers have reported sluggish sales. China Vanke Co., the country’s biggest public-traded developer said last month’s contracted sales fell 33 percent from a year ago, while Poly Real Estate Co., the second biggest, posted a 39 percent drop.

“The biggest risk for developers is not the slowdown of home prices, but the sluggish volume,” said Jinsong Du, a Hong Kong-based property analyst for Credit Suisse Group AG. “Developers are concerned about price cuts. But with no buyers, there’s no point of adjusting the prices.”

Investment in Chinese real estate rose 31 percent to 4.99 trillion yuan in the first 10 months from a year earlier, according to today’s data. New property construction climbed 22 percent to 1.6 billion square meters (17.1 billion square feet).

Home sales volume rose 9 percent in the first ten months from a year earlier to 710 million square meters, according to the data.

--Bonnie Cao, with assistance from Zhe Huang in Beijing. Editors: Linus Chua, Tomoko Yamazaki

To contact Bloomberg News staff for this story: Bonnie Cao in Shanghai at bcao4@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net


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