China’s home prices increased in August but at a slower pace as regulatory measures continue to rein in and stabilize the disorderly market. Major cities are expected to see limited room for growth in home prices, industry experts said. In August, home prices in 70 Chinese major cities either grew marginally or edged down, both in year-on-year and month-on-month terms, suggesting tightening rules continue to have the desired effect, according to Sheng Guoqing, Chief Statistician with the National Bureau of Statistics (NBS). Last month, new home prices in the 70 major cities tracked by the NBS grew 0.2% month-on-month and 3.7% year-on-year. Some 46 cities reported higher new home prices, down from 51 cities in July. New home prices in top-tier cities remained resilient with a 0.3% increase on average from the previous month. Shenzhen reported the largest month-on-month price increase of 1%, followed by Shanghai (0.4%) and Beijing (0.2%). But in Guangzhou, Guangdong province, home prices decreased by 0.1%. Compared to a year ago, the four benchmark cities’ new home prices grew at a slower pace of 5.7% on average, 0.3 percentage point less than the previous month.
In the 31 second-tier cities, mostly provincial capitals, prices rose 0.2% month-on-month, and 4.4% year-on-year, while prices remained flat and increased by 2.8% respectively in the 35 third-tier cities. Entering the third quarter, prices seemed to be cooling. Local governments’ tighter credit policies, in particular, led to fewer transactions that in turn led to a decrease in home prices, said Yan Yuejin, Director of the Shanghai-based E-house China Research and Development Institute. In third-tier cities, new home prices ended a 17-month period of growth in August although no tighter home purchase regulations were announced. Cities like Changde and Yueyang in Hunan province, Taiyuan in Shanxi province, Dali in Yunnan province, and Beihai in Guangxi reported comparatively larger year-on-year declines. In August, Yueyang’s Bureau of Housing and Construction issued a notice requiring that new home prices cannot be higher than the selling price the developer has filed with local housing authorities, nor more than 15% lower. Similar measures were taken in at least seven third- and fourth-tier cities.
First-tier cities continued to see their pre-owned home prices increase by 0.2% compared with the previous month. Guangzhou reported the largest month-on-month increase of 0.5% in transaction prices among the four mega cities, followed by Beijing (0.4%) and Shanghai (0.2%). Shenzhen posted a negative growth rate of 0.4% for the fourth successive month. Pre-owned home prices in the 31 second-tier cities stayed unchanged from a month ago, and increased 3.2% year-on-year. The 35 third-tier cities saw their pre-owned home prices edge down 0.1% from the previous month, but rising 1.9% year-on-year “Apart from February 2020 when Covid-19 hit severely, this is the first time since 2016 that nearly half of China’s major cities saw their pre-owned home prices drop, showing new tighter regulations have had the desired effect,” said Zhang Dawei, Chief Analyst at Centaline Property. Tighter rules are expected to further stabilize the home market, including in first-tier cities that led the home price rise in the first half of this year, said Zhang.
Meanwhile, the plight of cash-strapped, debt-laden China Evergrande Group, a prominent property developer, has drawn public attention. NBS Spokesman Fu Linghui said some large-sized property companies are encountering operational difficulties, and the impact on the real estate industry needs to be monitored. Evergrande has been bogged down in a liquidity crisis, facing more than USD300 billion in debt, while also failing to pay overdue bills and defaulting on multiple wealth management products. China Chengxin International (CCXI) has lowered Evergrande's bonds ratings to A from AA, and both the ratings of the bonds and its issuer were put on a watch list for further downgrades. Should the developer default on its debts, there will be adverse effects across the financial sector, with possible spillover effects on the financial system and on other real estate companies. Creditors who provide funds to Evergrande, mostly some small and medium-sized banks, will face great asset losses and risk of cross-defaults. Shares of other listed real estate groups also dropped last week.
This overview is based on reports by the China Daily, Global Times and Shanghai Daily.
