Bloomberg News

China November Home Prices Post Worse Performance This Year

December 20, 2011

(Updates with closing prices starting in seventh paragraph.)

Dec. 19 (Bloomberg) -- China’s home prices posted their worst performance this year with more than half of the 70 biggest cities monitored in November recording declines after the government reiterated plans to maintain property curbs.

New home prices dropped from the previous month in 49 of the cities monitored by the government, compared with 33 posting decreases in October, the national statistics bureau said in a statement on its website yesterday. Only five cities had gains in home prices, according to the statement.

“Home prices will fall further as the government’s tightening continues,” said Jinsong Du, a Hong Kong-based property analyst for Credit Suisse Group AG. “We’ll see more small developers file for bankruptcy or sell off their assets next year.”

The government said last week it won’t back away from real- estate industry curbs that are damping home sales and pulling down prices. China intensified measures this year by raising down payment and mortgage requirements and also imposed home purchase restrictions in 40 cities.

New home prices in China’s four major cities of Shanghai, Beijing, Shenzhen and Guangzhou each retreated 0.3 percent from October, the biggest monthly falls for these metropolitan areas this year, according to data from the statistics bureau.

The eastern port city of Ningbo and Shenyang in the north close to the North Korean border posted the biggest month-on- month declines of 0.6 percent, while Guiyang in the southwest rose 0.2 percent, the most among the 70 cities.

‘Critical Stage’

The gauge tracking property stocks on the Shanghai Composite Index rose 0.3 percent at the close, the only industry group that posted a gain on the benchmark measure.

The figures came after private data also showed further signs of cooling. China’s home prices fell for a third month in November, SouFun Holdings Ltd., the country’s biggest real estate website, said earlier this month based on its survey of 100 cities.

“It’s more and more clear that home prices are falling around the country,” said Shen Jian-guang, a Hong Kong-based economist at Mizuho Securities Asia Ltd. “It’s still the critical stage of China’s property curbs, so the government doesn’t want to send any signals of easing of those policies too early as it may reverse the trend.”

Chinese developers will face challenges over the next 12 to 18 months including slowing sales, tight bank credit and downward pressure on prices and profit margins, Moody’s Investors Services said in a Dec. 15 report.

Vanke, Poly

November contract sales of China Vanke Co., the country’s biggest developer, dropped 36 percent from last year, while those by Poly Real Estate Group Co., the second largest, fell 28 percent. Developers typically sell homes before they are built. Vanke shares were unchanged in Shenzhen, after falling as much as 2.6 percent, while Poly climbed 0.9 percent, reversing a 1.5 percent decline.

Existing home prices in Beijing slid 0.7 percent from October, while those in Shanghai retreated 0.5 percent, according to the statistics bureau.

China faces slower growth in home sales and construction next year, Fitch Ratings said in a report on Dec. 13, adding that smaller builders will be “more vulnerable” as the government maintains its property curbs.

Easing Measures?

The government may ease its measures in the second half of next year if home prices in major cities include Beijing and Shanghai fall 20 percent from their 2011 peaks, according to Mizuho’s Shen. Shanghai’s new home prices gained 2.4 percent from a year earlier in November, and those in the capital city added 1.3 percent, according to the statistics bureau.

Residential property investments accounted for 6.1 percent of the country’s gross domestic product last year, according to Citigroup Inc.

Falling home prices helped drive sales last month. Housing transactions rose 12 percent in November to 416.4 billion yuan ($65.7 billion), rebounding from a decline the previous month, the statistics bureau said earlier this month.

China’s home prices may fall between 5 percent and 10 percent next year, Kenny Wu, a Hong Kong-based analyst at JI- Asia Research Ltd., said before the release of yesterday’s data.

--Bonnie Cao. Editors: Linus Chua, Jim McDonald

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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