Chinese home prices fell in December for fourth straight month

JANUARY 19

BEIJING — China’s new home prices fell significantly in December for a fourth straight month, with persistent oversupply expected to keep pressure on real estate prices and investment, though year-end sales surged.

Average new home prices across China fell 4.3 per cent last month compared with year-ago levels, a faster decline than the 3.7 per cent drop seen in November, based on Reuters calculations from official data published yesterday.

The National Bureau of Statistics (NBS) data showed new home prices fell year-on-year in 68 of the 70 major cities it monitors, unchanged from November, though year-end sales volumes surged.



Mr Liu Jianwei, senior statistician at the NBS, said recent policy relaxations including November’s official interest rate cut and cheaper loans had boosted home-buying interest as developers pushed year-end sales.

Property sales last month in 70 major cities hit the highest level seen last year, up nearly 9 per cent from November, data from the NBS showed.

China’s top listed residential developer China Vanke reported a 129 per cent surge in sales last month from a year earlier, while sales over the same period for mid-sized Country Garden leapt 167 per cent.

The gloomy house price news foreshadowed economic growth data for 2014 due out tomorrow, with expansion expected to slow to 7.2 per cent, the weakest since the depths of the global financial crisis.

With real estate investment accounting for about 15 per cent of China’s gross domestic product growth, a 9 per cent decline in new floor space under construction in the first 11 months of last year could take a heavy toll.

“We expect China’s GDP growth to slow further in 2015 to 6.8 per cent, as the ongoing property downturn leads to further weakness in construction and industrial production, and related investment,” Mr Tao Wang, China economist at UBS, wrote in a note.

China’s real estate market has been plagued by falling prices and high inventories in recent months, crimping demand in 40 economic sectors ranging from steel to cement to furniture.

STOCK OVERHANG TO PERSIST

Property researcher CRIC said housing supply remains excessive despite the pick-up in sales, with only two major cities of 23 it studied seeing a decline in inventory at the end of last month.

“In most Tier 2 or Tier 3 cities, inventory destocking remains the main task for local property markets in 2015,” noted Mr Liu Yuan, the head of research at Shanghai property consultant Centaline.

Yet, despite falling prices and a stock overhang, several Chinese developers have said they will launch more housing projects this year as they strive to meet sales targets and boost market share — at the risk of adding to already-bloated inventories.