China's housing market continued recovering from a prolonged downturn in July, with new home prices marking a year-on-year rise for the first time since last September thanks to better market confidence and lower interest rates. Of the 70 large and medium-sized cities surveyed, new home prices climbed month on month in 35, up from 31 the previous month, with 26 reporting month-on-month price declines, down from July's 29, according to data released on Friday by the National Bureau of Statistics (NBS).
Year on year, 62 cities reported new home price drops, down from July's 67, with Shenzhen posting a sharp rise of 31.8 percent in new home prices. Average new home prices of the 70 cities grew 1.7 percent year on year compared with a drop of 0.4 percent in July, marking growth for the first time in the past 11 months.
For existing homes, 16 cities saw price declines in August on a monthly basis, 11 reported flat prices, while 43 cities posted gains. According to NBS statistician Liu Jianwei, the number of cities with price increases in both new houses and second-hand houses grew in August on a monthly basis but with a smaller margin due to a narrowing rise in first-tier cities.
Home prices in top-tier cities, where demand is high, saw strong growth year on year. While in second-tier cities, both new and existing home prices recorded mixed performances and for third-tier cities, home prices continued to decline. China's housing market took a downturn in 2014 due to weak demand and a surplus of unsold homes.
The cooling has continued into 2015, with both sales and prices falling and investment slowing. The central bank has moved to combat the slowdown, cutting benchmark interest rates four times since November and lowering banks' reserve requirement ratio twice since February. To help the emerging signs of improvement in the property sector, the country eased down payment requirements for second-home purchases and some local governments have rolled back their restrictions on home purchases.
China's banking and housing regulators slashed down payment requirements for second home purchases using provident funds to 20 percent from 30 percent in late August, provided the buyers have paid off mortgages on their first home Despite rising home prices, China's property investment continued to slow, indicating caution from builders and challenges facing the industry. Real estate investment rose 3.5 percent year on year to 6.11 trillion yuan (959.18 billion U.S. dollars) in the first eight months, with the growth rate 0.8 percentage points lower than that registered in the first seven months, according to NBS.
New housing construction stood at 951.82 million square meters in the period, plunging 16.8 percent from a year earlier. Sales value of commercial housing in the period went up 15.3 percent year on year to 4.8 trillion yuan. The growth rate was 1.9 percentage points higher than that in the first seven months, indicating nascent signs of recovery in some cities.
Chinese property developers' performance in the first half of 2015 show signs of stabilization, according to a report released by rating agency Moody's on Friday. "Rated developers adopted a more cautious approach to business expansion during 1H 2015. Such an approach slowed their debt growth to a level in line with the growth in contracted sales and revenue," says Kaven Tsang, a Moody's Vice President and Senior Credit Officer.
The country's leading residential-property developer China Vanke Co, whose earnings are seen as a barometer for China's major developers, posted slower net profit growth during the first six months of the year compared with gains in the same period last year. Developers with heavy investment in low-tier cities, those focusing on major cities or those working in competitive cities saw sharp margin declines as they cleared inventories, Moody's pointed out.
In addition, recovery of the housing market in small cities is weighed down by high inventories, said Zhang Dawei, chief analyst at Centaline Property. While home sales and prices have improved in bigger cities in recent months, an excess of unsold houses in small cities still keeps the housing market under pressure, said Zhang.
Zhang predicted that the previous booming property sales seen in September and October were unlikely this year due to limited demand and high inventory levels. While a slowdown in China's economy will weaken consumer purchasing power, Moody's said the impact on the property market should be manageable, because the Chinese government's eased monetary policies to support the domestic economy should in turn support property sales.