Home-Price Growth Weakens in China as Wider Curbs Kick In

(Bloomberg) -- Home-price growth in China weakened for the first time since February after authorities widened curbs to tamp down on a market that was re-inflating.

• New-home prices, excluding government-subsidized housing, increased just 0.66% on average in June from May in 70 major cities tracked by the government, data released by the National Bureau of Statistics showed Monday. That’s slightly slower than a 0.71% advance a month earlier and compares to a 0.62% gain in April

• Home sales for the month of June were relatively stable, gaining slightly faster by value but slower by area, separate data out Monday showed
• Investment in property development, an indicator of demand for everything from steel to home appliances, expanded at a faster 10.1% in June versus 9.5% in May

Key Insights

• The moderation follows a solid upswing in the previous three months. Officials walk a tightrope when it comes to property in China, wanting to keep a lid on housing prices, yet at the same time keep the property market strong enough to support a slowing economy
• “A turning point may have emerged,” said Ding Zuyu, co-president of property consultancy E-House. “Even though some cities appear red-hot, the overall market is still under pressure.”

• The softness may not be the end of local-government curbs, however. Authorities have the ability to fine tune policy on an individual city or town basis should they wish. Last month, Xi’an cracked down on who could buy property in the city after home values surged a nation-leading 2% in May
• While weaker price growth may tempt buyers and investors to wade in, developers are already under pressure from an array of measures aimed at curtailing their fundraising activities
• Read more: Single? Haven’t Paid Enough Tax? China Has a Home Ban for You

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• June’s smaller increase was largely due to weaker figures from less-developed tier 3 cities, where price growth slowed to 0.58% as support from the central bank for shanty-town renovation projects evaporated. Home-price growth also weakened in the biggest tier 1 cities, with values up just 0.25%, the slowest rise in three months
• Tier 2 cities continued to show strength, with prices accelerating 0.8%, the fastest in seven months. Many of these cities have loosened requirements to gain residency permits, a prerequisite to buy property in the various cities
• The biggest gains -- at 2.5% -- were in Luoyang, one of the biggest cities in Henan province, but still considered a tier 3 center
• For more detail on Monday’s data, click here

To contact Bloomberg News staff for this story: Emma Dong in Shanghai at edong10@bloomberg.net

To contact the editors responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net, Peter Vercoe

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With assistance from Bloomberg