Beijing Home Prices Drop For First Time In 2 Years – Financial Chronicle – 19-Nov-2014

November 19, 2014 - Uncategorized

Beijing home prices fell for the first time in almost two years as China’s property slowdown deepened, prompting developers to offer discounts to cut inventories.

New-home prices dropped in October in 67 cities of 70 tracked by the government from a year earlier, and in 69 from September, the National Bureau of Statistics said today. Prices in Beijing declined 1.3 percent, the first annual decrease since November 2012 and a reversal from the 14.7 percent jump in January from the previous year.

Home prices will continue to decline “modestly” next year as developers offer promotions or discounts to reduce stock that will remain high, according to Moody’s Investors Service. Housing sales slumped 10 percent in the first 10 months of this year from the same period in 2013 amid tight credit and an economic slowdown, prompting the government to ease curbs on an industry that has become a drag on growth.

“Many developers are still using price adjustments to at least get closer to their annual sales targets, although few can achieve them,” Donald Yu, Shenzhen-based analyst at Guotai Junan Securities Co., said. “Sales are rebounding, but not by that much. The oversupply issue remains quite severe.”

Developers tracked by Guotai Junan completed about 75 percent of their full-year sales targets in the first 10 months, Yu said.

The Shanghai Stock Exchange Property Index, which tracks developers listed on the city’s exchange, fell 1.1 percent as of 11:04 a.m. local time. The benchmark Shanghai Composite Index declined 0.5 percent.

Prices fell 1.1 percent from September in Beijing and 0.6 percent in Shanghai, according to the statement.

Hangzhou, Zhengzhou

Hangzhou, the capital of southeastern Zhejiang province, had the biggest drop on a year-on-year basis among all cities, with a 8.7 percent decline. Zhengzhou, the capital of central Henan province, was the only city where prices didn’t fall, remaining unchanged from the previous month.

In September, prices fell in 69 of the 70 cities from the previous month for the first time since January 2011 when the government changed the way it compiles the data.

New-home prices in 100 cities tracked by SouFun Holdings Ltd. fell 0.4 percent in October from September, dropping for the sixth consecutive month. The average price fell 0.5 percent from a year earlier, the first decline after 22 months of gains, China’s biggest real estate website owner said Oct. 31.

Easing Curbs

The central bank on Sept. 30 eased mortgage rules for homebuyers that have paid off existing loans. The move reversed a four-year campaign to contain home prices as Premier Li Keqiang seeks to prevent economic growth from drifting too far below the government’s 7.5 percent annual target.

All but five of 46 cities that had imposed home-purchase restrictions removed or relaxed such limits in recent months.

The loosening measures have had some “initial results,” Ping An Securities Co. analysts led by Beijing-based Wang Lin wrote in a Nov. 14 report, citing smaller sales declines.

The average selling price at 15 major developers dropped by 3 percent last month from September, led by a 23 percent drop atSunac China Holdings Ltd. (1918), while their contracted sales rose 15 percent, according to the Credit Suisse report.

Sales will drop as much as 5 percent next year, keeping developers’ liquidity tight and inventory high after strong new construction starts in recent years, Moody’s Hong Kong-based analysts led by Franco Leung wrote in a Nov. 11 report.

Home sales will recover slowly because mortgage discounts for first-home buyers are not attractive enough to lure back buyers, according to Ping An Securities.

“As tight credit continues to limit the recovery in demand, for the near term, ‘price-for-volume’ will remain the mainstream” strategy among developers, the Ping An Securities analysts wrote.

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