China House Prices Decline In Fewer Cities – Financial Chronicle – 19-Dec-2014

December 26, 2014 - Uncategorized

New-home prices fell in fewer Chinese cities last month after the government eased property curbs and cut interest rates for the first time since 2012, boosting demand.

Prices dropped in 67 cities of the 70 tracked by the government from October, the National Bureau of Statistics said in a statement today. Prices fell in 69 cities in October.

The central bank’s surprise reduction in benchmark rates in November has added to mortgage-rate discounts banks were offering first-home buyers, bolstering sales and reducing developers’ pressure to cut prices. Housing sales will rise next year, according to analysts at firms including ChinaInternational Capital Corp., reversing a slump in the first 11 months of this year amid tight credit and an economic slowdown.

“The government’s measures to boost the economy are taking effect,” Zhang Hongwei, a research director at Shanghai-based Tospur Real Estate Consulting Co., said in a phone interview. “Homebuyers have more cash to purchase properties after the interest rate cut, and more options since most local governments had dropped home purchasing limits.”

November new-home prices in Nanjing, Hefei and the first-tier city of Shenzhen were unchanged from October. New-home prices in Beijing declined 0.2 percent from October and fell 0.4 percent in Shanghai.

Any recovery in the market remains tentative. From a year earlier, new-home prices in November declined in 68 of the 70 cities, compared with 67 in October.

Large Supply

New-home prices in the first-tier cities of Beijing, Shanghai, Shenzhen and Guangzhou all declined last month from the same period last year.

“New-home prices are dropping because the supply is much larger than the demand,” said Liu Yuan, a Shanghai-based research director for Centaline Group, China’s biggest property agency. “The market sentiment and fundamentals are not good enough to drive price up.”

Property developers offering discounts to boost sales to meet year-end targets is also weighing on prices, Liu said.

The Shanghai Stock Exchange Property Index, which tracks developers listed on the city’s exchange, fell 0.2 percent as of 11:25 a.m. local time. The benchmark Shanghai Composite Index dropped 0.4 percent.

The rate cut will likely quicken a recovery in China’s property sector as it improves market sentiment and lowers homebuilders’ funding costs, according to a Nov. 24 report by Standard & Poor’s.

The People’s Bank of China pared its benchmark for loans longer than five years, on which Chinese lenders price their mortgages, by 40 basis points to 6.15 percent. All but five of the 46 cities that had imposed home-purchase restrictions removed or relaxed them this year.

Rate Cuts

Economists surveyed by Bloomberg News forecast more monetary easing as the world’s second-largest economy heads for its weakest annual growth since 1990.

Home prices in China’s major cities will rise again next year now that local governments have lifted property restrictions, Colin Dyer, president and chief executive officer of broker Jones Lang LaSalle Inc., said in a Dec. 5 interview in Beijing.

The average new-home price in 100 cities tracked by SouFun Holdings Ltd. fell 0.4 percent last month from October, the seventh consecutive decline, according to China’s biggest real estate website owner.

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