China Housing Prices Cool, But Lower-Tier Cities Buoy Market

     BEIJING (MNI) - Housing price growth in China slowed again in September as

stricter government property regulations took hold, although steady growth in

lower-tiered cities still buoyed the market in general.

     According to data released Monday by the National Bureau of Statistics, 15

hotspot cities among the 70 major Chinese cities the NBS monitors saw new home

prices drop or remain unchanged on a monthly basis. On a yearly basis, all 15

cities saw housing price growth slow from August, at rates ranging from 1.8 to

8.8 percentage points. The 15 cities comprise the four Tier-1 cities and 11

Tier-2 cities.

     Prices in Tier-1 cities dipped 0.2% month on month, while in Tier-2 cities

they rose 0.2% and in Tier-3 cities they increased 0.2%, said Liu Jianwei, a

senior NBS statistician. Prices in Beijing decreased 0.2%, while they dropped

0.1% in Shanghai and 0.5% in Guangzhou, and remain unchanged in Shenzhen.

     The y/y growth of new home prices in the Tier-1 cities also dipped 3.5

percentage points in September from August, the 12th consecutive month that

price growth in Tier-1 cities has decelerated, Liu said. Housing price growth in

Tier-2 cities dropped for the 10th consecutive month, 2.2 percentage points

lower than in August. 

     Tier-3 cities also experienced a y/y price growth deceleration for the

second straight month, 1.1 percentage points lower than in August. However, some

of these cities still saw sharp price growth rises. Beihai had the highest

growth of Tier-3 cities, at 14.2%, followed by Yangzhou at 13.3% and Bengbu at

13.2%. 

     The Tier-2 city of Xi'an had the highest y/y price growth of any city in

China, at 14.9%.

     On a monthly basis, Tier-3 cities led the growth in prices, with Anqing

ranking first in the nation at 0.9%, followed by the 0.8% gain in Jining and

Nanchong. Changchun and Harbin, both Tier-2 cities, also had 0.8% m/m gains.  

     E-house Real Estate Research Institute's calculations based on the NBS data

show that m/m average growth of new home prices overall was 0.2% in September,

unchanged from August and the lowest since October 2015, when the growth rate

was 0.1%. The y/y growth rate was 6.5%, the lowest since July 2016, when the

rate was 6.3%.

     "It reflects the effectiveness of housing price controls in various Chinese

cities for the past 12 months," Yan Yuejin, director of the research institute,

said in a note Monday. "Housing purchase quotas and mortgage restrictions

performed an especially important role in curbing investment and speculation."

     MNI calculations showed that home prices rose y/y in 67 out of the 70

cities in September, compared with 68 in August, while they fell in three

cities, compared with two in August. On a monthly basis, prices increased in 44

cities, two fewer than the 46 cities in August. Eighteen cities experienced

price decreases, the same as in August, while prices were unchanged in eight

cities. 

     MNI calculations gauging price growth acceleration and deceleration showed

y/y new home prices accelerated in 16 cities in September, compared with 23 in

August, while they decelerated in 49 cities, compared with 42 in August. 

     But m/m growth data showed a different picture. Compared with August, new

home price growth accelerated in 30 cities, doubling the 15 in August. New home

prices decelerated in 38 cities, much less than the 53 in August. 

     "The real situation is the cities where housing prices kept growing still

face big pressure on housing price growth, so we could say in general housing

prices nationwide are still growing constantly," Yan told MNI, predicting the

number of cities experience price acceleration would drop leading to a further

slowing of housing price growth and even a decline of housing prices nationwide

in the near future.

     He also said that it takes time for housing prices to drop from the time

policies are announced. "Additionally, land costs are still very high," Yan

said. "So it's not very realistic to see a widespread housing price drop."

     MNI calculations showed that two Tier-1 cities, five Tier-2 cities, and 13

Tier-3 cities saw price accelerations on a monthly basis, while two Tier-1

cities, 15 Tier-2 cities, and 21 Tier-3 cities experienced m/m price

deceleration.

     Year-over-year price growth accelerated in nine Tier-2 cities and seven

Tier-3 cities, while the growth rate edged down in all Tier-1 cities, 20 Tier-2

cities, and 25 Tier-3 cities.

     Zhang Dawei, chief analyst of Centaline Group, said price declines were

significant in Tier-1 and Tier-2 cities, which he expects will continue into the

fourth quarter.

     He noted that Tier-3 and Tier-4 cities continued to underpin possible

record sales in the Chinese property market this year, and comprised "the

biggest success of this round of housing control policies."

     Zhang predicted that the property market would continue to diverge, with

prices in Tier-1 and Tier-2 cities continuing to cool, while prices in Tier-3

and Tier-4 cities would increase. But both Yan and Zhang said more tightening

controls would be implemented in cities where home prices continued to rise. 

--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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