A slight dip in June, following months of soaring property prices, should encourage China’s government to continue anti-speculation efforts, despite some concern that market cooling measures could hamper economic growth. Still, property investment and prices are up significantly from 2009 levels, and the pace of construction hasn’t slowed. See the following article from Property Wire for more on this.
Average property prices in China fell in June, the first time that values have declined in 16 months, according to the latest figures to be published.
The nationwide index of urban property prices, which covers 70 cities, fell 0.1%, marking a long awaited turnaround in China’s overheated housing market which seems to be responding at last to government cooling measures.
The National Bureau of Statistics said it was the first month on month decline since February 2009. But prices are still considerably higher than they were a year ago. The property price index for June was still 11.4% higher than in 2009.
That cooling is regarded as being due to a rash of government policies announced in April aimed at combating surging real estate prices and the fall in prices and a reduction in sales is expected to continue in coming months.
Analysts have been warning for some time that China is going through an unsustainable property bubble but some investors say that declining prices may intensify the slowdown in the Chinese economy that began as the government has gradually phased out stimulus programs it began during the global financial crisis.
Later this week broader economic indicators for June and the second quarter are widely expected to show China’s economic growth slowing from its 11.9% in the first quarter of the year.
‘We don’t see a change in official policy yet but we’re expecting banks to start making more mortgage loans by the end of the year. The GDP number will be a telling sign of whether it could happen sooner,’ said Michael Klibaner, head of research at Jones Lang LaSalle in China.
The central government has tried to restrict speculation in the real estate market by requiring higher down payments and mortgage rates for many home buyers, limiting purchases by non-residents and accelerating construction of affordable housing. Real estate agencies and private research firms generally reported significant drops in sales in May and June, with many consumers waiting to see how the government’s crackdown on the market plays out before making a purchase.
But developers say there is no let up in sales. China Vanke, the country’s largest developer by market share said sales increased 28% in June. It said lower prices are proving attractive.
The amount of property being built is also not slowing. The volume of construction starts was up 55% from a year earlier in June. Total investment in real estate is up 38.1% this year from a year earlier.
The government is expected to keep up the cooling measures. ‘The June data will make policymakers very comfortable to continue the policies. They won’t easily give up on the controls, as long as property developers keep up relatively fast investment growth and as long as demand persists for land and houses,’ said Ren Zhiqiang, chairman of property developer Huayuan Group.
The government does not have plans to reduce its tightening in the short term, Minister of Land and Resources Xu Shaoshi confirmed in comments reported by the official Xinhua news agency.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.