Bloomberg News

China January Home Prices Post Worst Performance in a Year

February 20, 2012

Feb. 20 (Bloomberg) -- China’s January home prices recorded their worst performance in at least a year, with none of the 70 cities monitored by the government posting gains as Premier Wen Jiabao reiterated his determination to maintain property curbs.

Prices in 47 of the cities fell, while home values in the remaining 23 were unchanged from December, the National Statistics Bureau said in a statement on its website on Feb. 18. New home prices in the nation’s four major cities of Shanghai, Beijing, Shenzhen and Guangzhou declined for a fourth month. None of the cities posted gains in home prices for the first time since the government began releasing at the start of 2011 prices for 70 cities surveyed instead of a national average.

The data reflects a two-year effort by China to battle rising home prices with measures including higher down payments, mortgage rates to home purchase restrictions in 40 cities. China won’t waver on the real-estate controls and efforts to bring prices down to a reasonable level to ensure fairness and stability, Wen said on Feb. 12.

“The data wasn’t a surprise as the government maintained its property policies, and home prices will continue to fall till at least the later half of the year,” said Ting Lu, a Hong Kong-based economist at Bank of America Corp. unit Merrill Lynch.

Lu expects the government to start easing property curbs as soon as the fourth quarter, starting with some of its measures on mortgages and down payment requirements as “the government is happy to see home prices fall, but not a drastic crash.”

Wenzhou’s Falling Prices

The eastern city of Wenzhou posted the biggest drop for the third month, with home prices declining by 0.6 percent in January, according to the Statistics Bureau. A credit squeeze on smaller businesses in the city prompted a visit and pledge of financial aid from Wen in October.

“Wenzhou and other eastern coastal cities are liquidity- sensitive,” said Alan Jin, a Hong Kong-based property analyst at Mizuho Securities Asia Ltd., adding that prices dropped in these cities as “entrepreneurs with high-yield debt may have just sold off their properties for cash.”

New home prices in Beijing and Shanghai declined 0.1 percent, the data showed, while housing values in Shenzhen slid 0.2 percent and dropped 0.3 percent in Guangzhou.

“The figures won’t prompt the central government to release the curbs any time soon, because it probably would like to observe and study the market further,” Jin said.

Easing Economic Policies

China has said it will maintain its housing measures even as it eases other economic policies. The central bank on Feb. 18 cut the amount of cash that banks must set aside as reserves for the second time in three months to spur lending as Europe’s debt crisis and a cooling property market threaten economic growth.

Reserve ratios will fall 50 basis points effective Feb. 24. The cut may add 400 billion yuan ($64 billion) to the financial system, Australia & New Zealand Banking Group Ltd. estimates. A basis point is 0.01 percentage point.

The government’s home price figures came after private data also showed signs of cooling. China’s average home prices fell for a fifth month in December, according to SouFun Holdings Ltd., the country’s biggest real estate website.

Home sales in China’s four key cities declined during the week-long Lunar New Year holiday at the end of January. Transactions in Beijing, Shanghai, Guangzhou and Shenzhen fell 66 percent to 109 units, compared with the same holiday period a year earlier, Centaline Property Agency Ltd., China’s biggest real-estate brokerage, said Jan. 30.

The measure tracking property stocks on the Shanghai Composite Index climbed 7.7 percent this year, exceeding the benchmark gauge’s 7.2 percent advance.

Falling home prices fueled an attempt by China’s smaller cities to release tightening on property policies. The eastern city of Wuhu was the first Chinese city this year to ease measures ordered by the central government by waiving a deed tax and subsidizing some home purchases. The move was suspended three days later, following the outcome of a similar attempt in October by Foshan in southern China.

--Bonnie Cao. Editors: Linus Chua, Shiyin Chen

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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