China home prices rise faster in May as smaller cities join rally (updated)

Hopefluent group

18/06/2016 03:35

HONG KONG, June 18 (Reuters) - China's home prices rose at a 
faster pace in May, supported by quicker growth in second-tier 
cities and a broader recovery in smaller cities.   
    The recovery in China's property market since late last year 
has been a rare bright spot in the world's second-largest 
economy, which has been slowing amid weak demand at home and 
abroad, cooling investment and excess industrial capacity. 
    But eye-popping home price rises in the biggest cities have 
raised fears of overheating, and growing debt levels are adding 
to worries for policymakers and risks for banks.  
    Average new home prices in 70 major cities climbed 6.9 
percent last month from a year ago, accelerating from April's 
6.2 percent rise, according to Reuters calculations based on 
data from the National Statistics Bureau (NBS) on Saturday. 
    The NBS data showed 50 of 70 major cities tracked by the NBS 
saw year-on-year price gains, up from 46 in April.  
    "The average growth of new homes in first-tier cities 
started to narrow, while it continued to widen in second- and 
third-tier," Liu Jianwei, a senior statistician at the NBS, said 
in a statement accompanying the data. 
    The southern city of Shenzhen remained the top performer, 
with prices surging 53.2 percent from a year earlier, slower 
than the 62.4 percent rise in April. 
    On a month-on-month basis, however, prices in Shenzhen were 
up just 0.5 percent, slowing from a rise of 2.3 percent in the 
previous month and evidence that property cooling measures 
introduced in some big cities recently are starting to bite. 
    Shenzhen and Shanghai have tightened downpayment 
requirements for second homes and raised the eligibility bar for 
non-residents to purchase properties.  urn:newsml:reuters.com:*:nL3N1701XW     
    Shanghai prices rose 27.7 percent on-year, slightly slowing 
from 28 percent in April. Month-on-month gains cooled to 1.9 
percent from 3.1 percent in April. 
    While that cooling trend may be good news for policymakers 
in Beijing, the survey showed sharp price rises are now 
spreading to other parts of the country. 
    The coastal city of Xiamen surpassed the top-tier cities and 
saw the second highest price rise of 28 percent. Prices in 
second-tier cities Nanjing and Hefei also rose over 20 percent, 
more than the 19.5 percent seen in Beijing. 
    "But the expectation is prices in Shenzhen will keep on 
increasing. Those who can't afford it go to neighbouring cities 
such as Zhongshan, Dongguan and Huizhou, driving up their prices 
also," said Andy Lin, market research director of realtor 
Hopefluent  0733.HK , citing potential price growth in those 
cities of 30 to 40 percent.  
    The spillover of higher prices to major second-tier cities 
is fuelling speculation that local governments there may also 
tighten restrictions on home purchases soon to keep housing 
affordable.  
    The government of Tongzhou, the eastern suburban district of 
Beijing, tightened rules last week on purchases of second homes. 
    
    Despite signs of a broadening recovery, many small cities  
still have a large glut of unsold homes. The polarisation of the 
housing market is making policymakers' job harder as they look 
to support a faltering economy without inflating bubbles. 
    Investment growth in Chinese real estate slowed in May for 
the first time since December on a year-on-year basis as 
tightening measures in big cities took their toll.  urn:newsml:reuters.com:*:nL4N1901X9  
   
    China's housing market is a crucial engine of growth, 
accounting for around 15 percent of gross domestic product. 
Authorities are hoping a healthier property market will help 
support growth, even as the broader economy continues to 
decelerate. 
    Growth in China's fixed-asset investment slipped below 10 
percent for the first time since 2000 in January-May as a boost 
from record credit growth seemed to be quickly fading, putting 
expectations of further stimulus back on the table.  urn:newsml:reuters.com:*:nL4N1951PK 
 
 (Reporting by Clare Jim; Editing by Kim Coghill) 
 ((clare.jim@thomsonreuters.com; +852 2912 6653; Reuters 
Messaging: clare.jim.thomsonreuters.com@reuters.net)) 
 
Keywords: CHINA ECONOMY/HOMEPRICES