Home-Price Growth in China Is the Weakest Since March 2018

(Bloomberg) -- China’s home-price growth slowed for a fifth straight month in October, suggesting the property sector may weigh on expansion in the world’s second-largest economy, already buffeted by trade tensions and subdued domestic demand.

  • New-home prices, excluding state-subsidized housing, rose 0.5% last month from September in 70 major cities, National Bureau of Statistics data showed Friday. That’s the slowest gain since March 2018.
  • The price weakening was most evident in second-tier cities, mainly regional economic hubs, where almost one-third reported a decline in values. The biggest drop was in Jinan city in China’s northeast Shandong province, where prices slipped 1%
Home-Price Growth in China Is the Weakest Since March 2018

Key Insights

  • The slowdown may be even more widespread. A report Thursday showed average home values across the country slumped 1.4% last month, signaling weakening prices in smaller centers not included in the 70-city index
  • The challenge for policy makers now will be cushioning the slowdown yet avoid hobbling a key plank of growth. The real estate sector contributes to more than one-quarter of final demand, according to UBS Group AG. That could be tricky, as cash-strapped developers are want to offer deeper discounts to speed sales
  • The property industry will be “a major drag” for the economy next year, as developers wind back investments amid a more pessimistic outlook, Lu Ting, the chief China economist at Nomura International (HK) Ltd., said before the data release
  • No wonder home-buying curbs have started to show signs of loosening. Over the past few months, an array of local governments have made it easier for people to obtain highly sought-after residency permits, or hukou, which have the potential to spur sales

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