A truck mounted pump stands at a land site in the Kai Tak area of Hong Kong, China. (Photographer: Anthony Kwan/Bloomberg)

Fresh Slowdown in China Home Prices Turns Spotlight on Beijing

(Bloomberg) -- New home price growth in China decelerated for a third straight month.

  • The value of new homes, excluding government-subsidized housing, increased 0.61 percent on average in January from December in 70 major cities tracked by the government, data released by the National Bureau of Statistics Friday showed. That’s the slowest pace in nine months.

Key Insights

  • Softening price growth may spur more cities in China, particularly the smaller ones, to step up loosening measures as a way of boosting demand and ensuring the property market doesn’t collapse. Already several have moved in that direction, including Guangzhou, which relaxed age limits in residency permit applications, and Heze, which last year removed resale restrictions
  • It will also have investors closely watching for any property policy signals at the upcoming National People’s Congress next month. Beijing has long had a campaign to combat housing speculation -- President Xi Jinping once famously said that houses are for living in, not for speculation -- and so local authorities have been loathe to indulge in any more stringent loosening measures
  • Slowing rates of new home price growth is also bad news for builders, many of which are struggling under huge debt loads. Pre-sales proceeds are the industry’s biggest source of funding
  • A knock-on effect may also be felt in China’s retail market. Consumers tend to spend less when property values fade because they ‘feel’ poorer, at least on paper.

Market Reaction

  • An index that tracks Chinese developers traded in Hong Kong slipped 0.6 percent Friday, broadly in line with the benchmark Hang Seng Index

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  • Prices in so-called tier 3 and 4 cities climbed 0.65 percent, while those in Beijing, Shanghai and other tier-1 hubs rose 0.38 percent
  • HSBC Holdings Plc in January said Chinese cities with elevated loan-to-deposit ratios were most at risk against the backdrop of a slowing real estate sector
Fresh Slowdown in China Home Prices Turns Spotlight on Beijing
  • Second-hand home prices -- which are free of the government intervention that affects prices for new homes -- declined in the largest four hubs for a fifth straight month

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