March 18, 2015 / 2:02 AM / 3 years ago

China February new home prices fall at fastest rate on record, add risk to growth target

HONG KONG (Reuters) - China’s average new home prices fell at the fastest pace on record in February from a year earlier, hurt by slower sales during the Lunar New Year holidays, but developers and analysts expected prices to slowly recover - particularly in top-tier cities.

A property sales agent looks at a penthouse unit model of "The Rise", the latest development released by Cheung Kong Holdings Ltd., at a promotional event in Hong Kong in this September 5, 2013 file photo. REUTERS/Bobby Yip/Files

Average new home prices in China’s 70 major cities dropped 5.7 percent last month from a year ago, the sixth consecutive fall, following January’s 5.1 percent decline. It was the biggest annual decline in the nationwide survey since it began in 2011.

The monthly fall in February from January was 0.4 percent, the same as in the previous month, and pointing to sustained risks to the government’s new 7 percent economic growth target for the year. The property sector accounts for some 15 percent of China’s gross domestic product (GDP).

The record fall coincided with news that Chinese banks have extended Evergrande Real Estate Group (3333.HK) 100 billion yuan ($16 billion) in credit, as the real estate slump extends to one of the country’s biggest and most indebted property developers.

Chinese real estate stocks .CSI300REI jumped in response to the price news, with the Bank of Communications expecting the government will announce more measures to bolster the market, including lowering taxes and loosening requirements for mortgage lending.

“Over the weekend, Premier Li Keqiang vowed to support the economy if it continues to slide, so the worse the economic data, the sooner stimulus policies will be rolled out,” said Luo Wenbo, analyst at Qilu Securities.

“Investors wouldn’t have been so bold if the premier hadn’t made that promise.”

The National Bureau of Statistics (NBS) data showed new home prices in Beijing fell 0.2 percent between February and January, accelerating from a 0.1 percent fall in January from December, while Shanghai prices fell again by 0.1 percent after stabilising following eight straight month-on-month falls.

Westpac Global Economics said in a report that home price consolidation was limited to tier 1 markets. “Outside the wealthier coastal cities, the process of clearing excess inventory requires further discounting at the new end, and lower asking prices in secondary markets.”

Of the 70 major cities the NBS monitors, 66 posted a monthly decline, up from January’s 64.


    Liu Jianwei, a senior statistician at the NBS, said in a statement on Wednesday that sales in March will show a significant seasonal rebound from February’s Lunar New Year pause.

    Sales volume in 40 major cities monitored by housing data company CREIS rose 51.6 percent in the first week of March compared to the previous week, while they rose around 23 percent in the second week. Most of the rise came from first- and second-tier cities.

    “Although the overall market eased in the beginning of the year, as policies loosen further and new launches pick up in March, the property market is expected to see a recovery,” said consultancy China Real Estate Index System (CREIS).

    Sino-Ocean Land (3377.HK) also forecast a slight rise in prices for top-tier cities in 2015 in an earning statement on Tuesday. Shanghai-based developer CIFI Holdings (0884.HK) said last week it plans to raise prices by 10 to 15 percent this year.

    Editing by Eric Meijer

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