Home price growth slows, further moderation eyed in China

Home price in major Chinese cities grew at a slower pace in February, with fewer cities seeing month-on-month price rises, official data showed on Tuesday. Last month, new home prices in 70 major cities tracked by the National Bureau of Statistics (NBS) rose by an average of 11.1 percent year on year, slowing by 1.3 percentage points from January, the NBS said in a statement. Prices for existing homes rose 6.4 percent year on year, compared with an average growth of 7.4 percent in January, according to the statement. Month on month, 57 out of the statistical pool of 70 cities saw rises in new home prices, fewer than 62 cities in January. Prices dropped in four cities and stayed unchanged from a month ago in the other nine cities. For existing homes, prices increased in 46 cities month on month, down from 48 cities in the previous month. Prices dropped in 15 cities and remained flat in nine cities, the NBS said. "The deceleration in home price growth was partly due to tapering pent-up demand after rapid home sales growth in 2013," said Lu Ting, chief China economist with Bank of America Merrill Lynch. Moreover, tight mortgage conditions and higher second-home mortgage down payments in many major cities could also have weakened property demand, Lu said. A slowing trend of home price increases became clear in January, amid price cuts in some major cities and concerns about tight credit for buyers. Zhang Dawei, chief analyst with property agent Centaline, said that strong growth in first-tier cities and some second-tier cities has clouded what is an overall downward trend in the country's property market. In Beijing's case, new home prices last month surged by 15.5 percent year on year and existing house sales grew 15.9 percent year on year. Home prices in other first-tier cities, including Shanghai, Guangzhou and Shenzhen, all rose more than 10 percent year on year last month. "More than a month after the Spring Festival, there have been some subtle changes in the psychology between property developers and home buyers," Zhang said. Centaline data showed that the home sales of 30 property enterprises dropped 39 percent month on month in February to 66.5 billion yuan (10.84 billion U.S. dollars). According to the NBS, the sales value of residential properties in China went down 5 percent year on year to 598.5 billion yuan in the first two months, while the amount of housing floor space sold during the period went down 1.2 percent year on year. The drop in sales has led some companies to sacrifice prices to promote sales. Recently, media reports have focused on price cuts in some new developments of Hangzhou, Nanjing and Guangzhou. Zhang said that those cases are strong signals for further price declines in first- and second-tier cities, significantly affecting the psychology of potential home buyers. "Although these are only isolated cases right now, we can not rule out the possibility that they may expand into a new trend," Zhang said. Lu said doubt over the housing market could remain because of the government's continued emphasis on affordable housing. The government work report released earlier this month pledged to improve the affordable housing system and set a target to begin construction on more than 7 million units and complete over 4.7 million units of affordable housing in 2014.