China Home Prices Continue To Cool On Rising Mortgage Rates

     BEIJING (MNI) - China's housing market continued to cool in July as

restrictions in the over-heated property sector, including further limits on

home purchases and higher mortgage lending rates, have had their intended

effect, data released by the National Bureau of Statistics on Friday show.

     New home prices rose on a year-on-year basis in all 70 cities included in

the NBS statistics, the same as in June, although at a much slower pace. 

     The growth of new home prices in the four Tier 1 cities decelerated on an

annualized basis for the 10th consecutive month in July, down a collective 1.7

percentage points from June. Beijing, Shanghai, Shenzhen and Guangzhou recorded

y/y growth rates of 9.6%, 8.4%, 0.5% and 16.9%, respectively. 

     The 31 Tier 2 cities saw their eighth straight month of year-on-year growth

declines in July, dropping a collective 0.8 percentage point compared with June,

the NBS said. 

     "The rise in mortgage rates is one of the main contributors" of the

slowdown, "as it has curbed purchasing demand," Yan Yuejin, director of the

research department at E-house, a Shanghai-based property information and

service provider, told MNI. 

     Since Aug. 12, several big banks in Guangzhou, one of the four Tier 1

cities, have raised their mortgage rates by 5% for first-time home buyers. Some

banks in Beijing have also hiked rates by as much as 15%. According to Rong360,

an online financial data provider, 90% of banks have cancelled their previously

offered preferential mortgage rates, and 126 banks raised rates in July, 94 more

than in June.

     The further enforcement of strict regulatory policies has also weighed on

price growth, particularly in smaller cities. In its recently issued annual

China Regional Financial Report, the People's Bank of China reiterated that

speculative activities in the property market would be eliminated, and that

prices in the property market would show weakening momentum. It also asked local

governments to enforce regulatory policies.

     Local governments in the largest cities -- Tier 1 and Tier 2 -- started to

tighten controls on the property market last October, with a second round of

tightening in mid-March. However, regulations in Tier-3 and Tier-4 cities have

been less strict than in larger cities.

     Housing price growth decelerated or declined in 46 of the 70 cities in July

on a month-on-month basis, compared with 37 in June. The cities showing

decelerating or declining m/m price growth included three of the four Tier-1

cities, 21 of the 31 Tier-2 cities and 22 of 35 Tier-3 cities, according to MNI

calculations.

     Anqing had the greatest m/m decline in prices among the 70 cities in July,

at -0.3%.

     "The housing prices in Tier 1 cities remained stable, while those in Tier 2

and Tier 3 cities dropped in an obvious way compared with June as a result of

the launching of regulations," Liu Jianwei, senior analyst at the NBS, said in a

statement on the NBS website. 

     New home prices in Tier 1 cities barely changed in July on a month-on-month

basis, while those in Tier 2 and 3 cities rose 0.4% m/m, down 0.2 percentage

point from the previous month, the NBS noted. Beijing, Shenzhen and Shanghai

recorded declines of 0.1%, 0.2% and no growth, respectively, while Guangzhou saw

0.4% growth.

     The highest y/y price price gains were seen in Wuxi, Changsha and Jinan,

which were up 19.7%, 18.3% and 16.9%, respectively. 

     Yuan said he expected housing prices to continue to cool as mortgage rates

continue to rise and housing market controls are further tightened.

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

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

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