China Property Investment Posts Lowest Growth Rate This Yr

     BEIJING (MNI) - China property investment growth cooled in July, with the

year-to-date growth rate slowing to the lowest so far this year, according to

data released by the National Bureau of Statistics on Monday.

     Property investment grew 7.9% year-on-year to CNY5.9761 trillion in the

January to July period, with the growth rate down from 8.5% in the first six

months. 

     Investment in residential property, which comprises 68.1% of overall

property investment, grew 10.0%, down from 10.2% in the January-June period.

     The narrowing growth rate was due to increasing difficulty property

developers are having obtaining needed funds as market liquidity has tightened

recently, Yan Yuejin, director of the research department at E-house, a New York

Stock-listed property information and service provider based in Shanghai, said

in a note Monday.

     "But the growth rate is still more than 5%, so from this perspective the

investment performance is still good," Yan argued.

     Housing starts grew 8.0% to 10.0371 trillion square meters in the

January-July period, well below the rates of 10.6% in January-June period and

9.5% in January to May.

     "The peak of investment in the property market may have passed," China

Industrial Bank Research commented in a note.  

     Property developers acquired 1.2410 trillion square meters of land in the

first seven months, up 11.1% from the same period last year and  2.3 percentage

points higher than in January-June. Land transactions rose significantly, up 41%

higher y/y and 2.5 percentage points higher than in the first six months. 

     "It shows that currently property companies are still very active in buying

land," Yan said. "One big driver is they are having better land acquisition

opportunities." 

     Some local governments are speeding up land sales, Yan told MNI.

     On the other hand, both property sales and revenue decelerated in July.

Sales rose 14% y/y to 863.51 million square meters in the first seven months,

down from 16.1% growth in January-June. Sales growth dropped in all property

categories in January-July vs January-June: residential property sales 11.5% vs

13.5%; office buildings 33.7% vs 38.8%; and property units for business

operations 29.4% vs 32.5%.

     The slowing of sales growth reflects the continued impact of local

government measures to rein in rising housing prices. Since last year, the local

Chinese governments have tightened controls on the sector, issuing new policies

including: limiting the number of houses a family can buy; increasing the wait

time after purchase before a property unit can be put back onto the market;

requiring higher down-payments; and, recently, requiring banks to raise mortgage

interest rates.

     The sales drop is more obvious in larger Tier-1 and Tier-2 cities and shows

China's efforts in deleverage and removing bubble in the property sector are

paying off, Yan noted.

     Property sector revenue grew 18.9% to CNY6.8461 trillion, with the growth

rate down 2.6 percentage points from 21.5% in January-June.

     Inventories of unsold properties have improved amid the government's

campaign to cut excess inventories since mid-March. Total inventories dropped

10.81 million square meters to 634.96 million square meters in July, compared

with the 645.77 million in June.

     The overall inventory decline was due to lower stocks of unsold residential

properties. In contrast, the inventory of unsold office buildings rose 10,000

square meters in the first seven months, compared with the 0.6 million square

meters drop recorded in January-June. The decline in inventories of property

units for business operations slowed, dropping 0.64 million square meters

compared with the 1.28 million square meters decline in January-June.

     Funding for property developers rose 9.7% to CNY8.7664 trillion

year-to-date in July, 1.5 percentage points lower than that in the first six

months.

     This reflects the continuing tightening of funding available for property

development, which, in turn, related overall tightened of credit policies for

the property sector, forcing developers to find new financing channels, Yan

said.

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

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

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