China Home Prices Up Most in Seven Months as Economy Reopens

(Bloomberg) -- China’s home prices rose at the fastest pace in seven months in May, as the property market continues its rapid recovery from the coronavirus shutdowns.

• New-home prices in 70 major cities, excluding state-subsidized housing, increased 0.49% last month, National Bureau of Statistics data released Monday showed. That’s up from a 0.42% gain in April.
• Values in the secondary market, which is largely free from government intervention, gained 0.24%, also the most in seven months.

Key Insights

• Interest in property is rekindling as China returns to business as usual, with prices rising across small, medium and large cities. And with the central bank opening the taps on credit to support the economy, housing is again seen as a safe place to store wealth.

• Discounts, more support from local governments and a surge in supply since the virus was brought under control have also boosted demand. Residential sales last month exceeded pre-virus levels in almost half of the 28 cities monitored by China Real Estate Information Corp., and hit a two-year high in cities such as Shanghai and Hangzhou.
• Even so, analysts are split on the outlook for the rest of the year. John Lam, head of China real estate research at UBS Group AG, expects prices to hold broadly stable on a more positive funding environment for developers, which reduces the need to cut prices to boost cashflow.
• For Macquarie Securities Ltd.’s Larry Hu, “property is the wild card this year.” While price momentum is holding up well in larger cities, values in smaller towns are under more pressure, he said.

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• The rebound was especially strong across the four biggest cities, including Shanghai and Beijing, which often precedes a wider recovery. Existing home prices in the four megacities surged more than 1% for a second consecutive month, which hasn’t happened since the last market up cycle in late 2016.
• The recovery was milder in smaller cities, with existing-home prices in second-tier cities, which are mostly provincial capitals, gaining 0.23%.
• A boost in credit drove developers’ land purchases in May to the highest this year, according to Bloomberg calculations on separate data released Monday. New starts by builders also saw the first year-on-year increase of 2020.
• For more details on the price data, click here

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