China Home Prices Fall in Record Cities Signals More Easing

Jul 18, 2014 5:13 am ET

(Updates with closing share price in ninth paragraph.)

July 18 (Bloomberg) -- China’s new-home prices fell in a record number of cities tracked by the government as developers cut prices to boost sales volume, signaling curbs will be relaxed in more cities.

Prices fell in 55 of the 70 cities last month from May, the National Bureau of Statistics said in a statement today, the most since January 2011 when the government changed the way it compiles the statistics. Prices in Shanghai and the southern city of Guangzhou fell 0.6 percent each from May, the biggest drop since January 2011, while they declined 0.4 percent in Shenzhen. Prices fell 1.7 percent in the eastern city of Hangzhou, the largest monthly decline among all the cities.

“The current biggest problem of China’s property industry is that the housing inventories are too high,” said Liu Li- Gang, chief Greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong in a phone interview today. “But the declines are still not very big. With more cities relaxing curbs and the economy stabilizing, the property market will gradually stabilize.”

Some Chinese cities started to relax property curbs to stimulate the local market, while developers have cut prices since March to lure buyers. The central bank in May called on the nation’s biggest lenders to accelerate the granting of mortgages, and urged them to give priority to first-home buyers.

Cutting Inventories

Housing Minister Chen Zhenggao urged cities with high housing inventories to reduce them “with all means,” 21st Century Business Herald reported today, citing an unidentified local housing official who participated in a meeting that Chen held. Local authorities could set policies to stabilize their property markets based on local conditions, according to the paper.

Private data also signaled the housing market is cooling. Prices fell for the second straight month in June, according to SouFun Holdings Ltd., the nation’s biggest real estate website. Prices fell for the first time in May since June 2012.

The northern city of Hohhot and the eastern city of Jinan became the first among about 40 Chinese cities to ease home- purchase restrictions.

Home prices in the eastern port city of Ningbo fell 1.5 percent from last month, the second-biggest decline, while the northern city of Luoyang fell 1.2 percent.

‘Loosening Measures’

The Shanghai Stock Exchange Property Index, which tracks 24 developers listed on the city’s exchange, rose 2.1 percent at the close of trading, making it the best performer among five industry groups on the benchmark.

“With falling home prices, we expect various cities to release loosening measures, this is an opportune time to do so,” said Zhang Haidong, an analyst at Tebon Securities Co. in Shanghai. “Investors expect the property sector to stabilize in the fourth quarter and pull the economy along.”

New home price gains in first-tier cities also slowed from a year earlier. Prices jumped 6.4 percent in Beijing, 7.7 percent in Guangzhou and 6.6 percent in Shenzhen, all the least since February last year. Home values increased 7 percent in Shanghai, the smallest since March last year.

Existing-home prices fell 1.3 percent in Beijing in June from a month earlier and dropped 0.7 percent in Shanghai, according to the data.

China’s property market may be in better shape in the second half of the year compared with the first, China Securities Journal reported yesterday, citing Qin Hong, director of policy research at the Ministry of Housing and Urban-Rural Development.

Home sales rose 33 percent in June from the previous month, the statistics bureau said earlier this week, the biggest monthly gain this year.

Beijing, Shanghai, the country’s financial center, and the southern business hubs of Guangzhou and Shenzhen are considered first tier by the bureau of statistics.

--With assistance from Weiyi Lim in Singapore.