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(Z1) Trend Needle Points South

--But Y/Y Housing Price Growth Slows On Favorable Base Effect
     BEIJING (MNI) - Growth of Chinese new home prices edged up in October
compared to September, though it continued its downward trend on a yearly basis
as government-led curbs to slow skyrocketing housing price growth and prevent a
property bubble continued to have their intended effect. 
     Housing prices rose month-on-month in October in 50 out of the 70 cities
surveyed by the National Bureau of Statistics, more than the 44 cities reporting
price rises in September and the 46 cities in August, according to MNI
calculations based on data released Saturday by the NBS.  
     Month-on-month prices fell in 14 cities, fewer than the 18 in September.
Six cities reported no change in new home prices in October, more than the eight
in the month-ago period.
     Nationwide new home prices rose 0.3% m/m in October, up from 0.2% in
September, according to calculations by Yan Yuejin, director of E-house Real
Estate Research Institute, a subsidiary of the New York Stock-listed E-house
(China) Holdings Limited.
     Yan attributed accelerating prices to robust home sales in October. Home
purchasers have been watching changes in the market for months and some made the
decision to purchase in October due to continuing strong demand, Yan told MNI. 
     But he noted the price growth rate in October was still a narrowing from
the 0.5% monthly gains often seen during 2016. 
     Indeed, strong monthly gains in October last year created a favorable base
effect that allowed year-on-year growth rates to decline in more cities in
October this year than in September. 
     New home prices rose in 60 cities in October on an annual basis, fewer than
the 67 in September. The other 10 cities reported y/y price decreases.
     Price growth decelerated y/y in 51 cities, two more than in September and
accelerated in 17 cities, one more than in September. In the two other cities,
the price growth rate was unchanged, down from five cities in September.
     Yan's calculations showed y/y growth of new home price was 5.7%, down from
6.5% in September.
     The slowing of annual new home price growth was due to the Chinese
government's housing controls which began in October last year and were
reinforced in March, including: setting home purchase quotas for individuals and
families; prohibiting the previous practice of transforming commercial property
into residential units; tightening controls on credit to the property sector;
and increasing mortgage interest rates.
     Yan argued the y/y growth rate was in line with market expectations. He
projected y/y growth would continue to slow or even drop into a negative
territory next year as the government is expected to further tighten curbs on
the property sector.  In particular, the government is reported to be preparing
plans for a nationwide property tax to curb speculation in the sector.
     On a monthly basis, the price growth rates were highest in Harbin (+1.7%),
the capital city of rustbelt Northeastern Heilongjiang Province, followed by
0.9% gains in both Hohhot in Inner Mongolia and Nanchong in Sichuan Province.
     Harbin is experiencing a warming of home purchases due to new construction
in the area, Yan said. Price growth in Hohhot shows the property market has
already started to heat up because railway construction in the area, he said. 
     The year-over-year price growth was highest in Beihai of Guangxi Province
at 14.5%, followed by Xi'an at 14.5%, Yangzhou at 12%, followed by Chongqing and
Shaoguan, both at 11.5%.
     Yan noted that Beihai has fewer government housing restrictions than larger
neighboring cities, with spill-over effects from tight controls in Hainan
helping to boost Beihai housing prices.
     Yan said price growth rates in ten cities already fell in October those of
a year ago. The ten cities include Shenzhen, Chengdu, Fuzhou, Nanjing, Hangzhou,
Hefei, Zhengzhou, Wuxi, Shanghai and Beijing, all major cities with the highest
housing prices and fastest price growth in China.
     Divided into tiers, on a monthly basis, Tier-1 cities saw a 0.1% drop in
price growth, compared with a 0.3% rise in Tier-2 cities and 0.3% increase in
Tier-3 cities, senior the NBS Senior Statistician Liu Jianwei told MNI on
Saturday. The results reinforce the conclusion that property markets in Tier-3
and Tier-4 cities are continuing to buoy the overall Chinese property sector.
     The y/y growth figures showed a different picture. Tier-1 cities
experienced a price drop for the 13th consecutive month, down 0.5% m/m. Tier-2
cities saw price growth of 1%, the 11th straight slowing, while Tier-3 cities
slowed for a third month to +0.7%.
--MNI Beijing Bureau; +86 (10) 8532-5998; email:
--MNI BEIJING Bureau; +1 202-371-2121; email:
[TOPICS: MAQDS$,M$A$$$,M$Q$$$]