China August Property Data Show A Downsizing Market

     BEIJING (MNI) - Growth in property investment, sales, and developers' funds

showed signs of slowing in the year to date through August, data released

Thursday by the National Bureau of Statistics showed.

     Property investment rose 7.9% in the January-August period to CNY6.9494

trillion, the lowest year-to-date growth rate, along with the January-July

period, since 6.9% growth for the January-December 2016 period, the NBS said.

     The NBS only releases figures in year-to-date terms.

     Yan Yuejin, director of the research department at E-House, a

Shanghai-based property consultancy, said in a note that property investment

growth was facing some headwinds although it was on a stable growth track. "In

general, there's no so-called 'slowing' because the year-on-year growth rate is

still positive," Yan said in an interview with MNI.

     Housing starts increased 7.6% to 1.15 billion square meters in the January

to August period, a 0.4 percentage point decrease from January-July.

     Developers acquired 143 million square meters of property in the

January-August period, a 10.1% increase and one percentage point lower than the

January-July period, but still the second-highest increase this year. Land

transactions amounted to CNY660.9 billion in value, or 42.7% growth, 1.7

percentage points higher than January-July.

     Houses sold in terms of area rose 12.7% y/y in January-August to 985

million square meters, 1.3 percentage points lower than the first seven months.

Housing sales by value climbed 17.2% to CNY7.8096 trillion, 1.7 percentage

points down from January-July.

     Yan said government controls on the property market to rein in skyrocketing

housing prices have cooled the market and brought new changes to the market. But

he noted that growth is still in positive territory because strong sales in

Tier-3 and Tier-4 cities have supported overall sales nationwide.

     Inventories continued to drop as the Chinese government speeds up housing

inventory cuts, especially in lower-tiered cities where enthusiasm for property

investment is not in balance with the local economic conditions and population

size. Inventories were 624 million square meters at the end of August, 11.44

million square meters less than at the end of July.

     The inventory decline came mostly by way of a reduction in residential

houses, which saw a drop of 9.87 million square meters, while office building

inventories were down 0.43 million square meters and commercial operation

property units witnessed an inventory decrease of 0.87 million square meters.

     With the inventory reduction policies now in their third year, inventories

this year are expected to drop to their lowest level in three years, Zhang

Dawei, chief analyst of Centaline Group, a property information and service

provider based in Hong Kong, said in a blog post on Thursday.

     He said most Chinese cities are already experiencing improved inventory

conditions, except a few cities in northeastern and northwestern China, where

outward population flows are heavier. Zhang also predicted that housing prices

in Tier-3 and Tier-4 cities may rise due to the significant inventory reductions

in those cities.

     Funds available to property developers in the first eight months grew just

9% to CNY9.9804 trillion, 0.7 percentage point lower than growth in the

January-July period and the second-lowest growth level this year, since the 7.0%

growth rate in the January-February period.

     Yan said the Chinese government's crackdown on financial risks contributed

to the drop, though it did help direct the property market toward a better

investment track. He added that property companies' aggressive land acquisitions

would weaken as their liquidity continues to tighten, and they may take extra

measures such as reducing listed prices to speed up capital return.

     Deng Haiqing, chief economist of Jiuzhou Securities, said in a note on

Thursday that China's tightening controls in the property sector could continue

to put pressure on China's economic growth. He warned that downward risks in

property investment would continue with the tightened regulations, and that

sales may continue to drop in Tier-2 and Tier-3 cities.

     But Zhang said housing sales and investment were still "very strong," and

he predicted that whole-year sales would break a record.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

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