China: New home price growth stalls in February as demand remains frail

BEIJING: China‘s new home prices stalled in February after eking out a small gain a month earlier, official data on Wednesday showed, pointing to still fragile demand despite a gradual easing in property curbs by authorities to boost buying sentiment.

Average new home prices in China‘s 70 major cities were flat at 0.00% month-on-month, compared with a 0.1% gain in January, according to Reuters calculations based on data released by the National Bureau of Statistics (NBS).

From a year earlier, new home prices rose 2.0%, the slowest pace since December 2015, and also easing from the 2.3% growth in January.

China’s property market slowed down sharply last year as Beijing’s deleveraging campaign triggered a liquidity crisis in some major property developers, leading to bond defaults, a plunge in share prices and projects being shelved or left unfinished.

Authorities mainly in small cities have rolled out a slew of easing steps including smaller down-payments, cuts in mortgage rates and relaxations in purchase of second homes.

The looser regulations have yet to drive a nationwide rebound.

Monthly new home prices rose 0.5% in tier-one cities including Beijing and Shanghai, narrowing from the 0.6% growth in January.

In tier-two cities, which include some provincial capitals, new home prices were flat on month after January’s 0.1% gain, while in tier-three and tier-four cities, prices fell 0.3%, widening from the 0.2% decrease in January.

“A slight cooling in prices compared to January shows that there is resistance to a bounce,” said Yan Yuejin, research director of Shanghai-based E-house China Research and Development.

“We should be wary of a rapid cooling in tier-three and four cities.”

At the annual meeting of parliament earlier this month, Premier Li Keqiang said China will better meet homebuyers’ legitimate needs, and will implement city-specific policies.

The number of cities reporting price gains decreased to 27 from 28 in January.

A surge in domestic Omicron cases in recent weeks have also cooled somewhat recovering demand in big cities.

Mainland China reported 1,952 new confirmed coronavirus cases on Tuesday, the country’s national health authority said, compared with 3,602 a day earlier.

The outbreaks have led to a home buying freeze in local property markets in Shanghai, Shenzhen and the eastern city of Hangzhou, with a small rebound seen being halted, said Zhang Dawei, chief analyst at property agency Centaline.

“(But) the market is expected to stabilise in March-April as mortgage lending, the biggest factor, is easing.”

Household loans, mostly mortgages, suffered a rare contraction of 336.9 billion yuan in February, compared with 843 billion yuan in January, pointing to continued weakness in the property market, according to central bank data last week.