MNI: 80 China Cities Report 27th Straight Drop In Inventories

     BEIJING (MNI) - Property inventories in 80 Chinese cities continued to drop

on an annualized basis in October for the 27th consecutive month, E-house Real

Estate Research Institute said in a report Monday.

     The 80 Chinese cities that E-house monitors reported a 10.1% year-on-year

drop, or 2.1% month-on-month decline, in housing property inventories, at 394.9

million square meters. Properties included in the survey include both

residential and commercial properties. 

     "The inventory scale has dropped to the level four years ago," Yan Yuejin,

director of the Shanghai-based consultancy, said in the report. Yan said the

drop was a reflection of the government's inventory-reduction campaign over the

past three years.

     Cities at all three tier levels saw declines, with inventories in Tier-1

cities down 17.6%, those in Tier-2 cities down 9.6%, and those in Tier-3 cities

also dropping 9.6%.

     Thirteen cities saw y/y inventories grow, while 67 cities saw declines,

showing that inventories need to be boosted in some cities, E-house said.

     Tighter restriction on the issuance of pre-sale licenses to property

developers have weighed on inventories, E-house said.

     In the first 10 months, pre-sale property areas that have been approved by

the government dropped 16.5% y/y to 327.11 million square meters.

     The Chinese government, after a series of measures to clamp down on

skyrocketing housing prices in the red-hot property market including increasing

down payments and imposing housing purchase quotas, has also started to limit

the highest price property developers can set for their newly released property

projects.

     Countrywide, the current stock of new property units could be consumed in

10.8 months, flat with September, but lower than the 12 to 16 months that is

considered a "reasonable range," according to E-house. Inventories in Tier-1

cities are closer to the normal range, at 11.9 months, while those in Tier-2 and

Tier-3 cities are at 10.7 months and 10.9 months, respectively.

     Lower levels of inventories in some lower-tiered cities such as Xuzhou,

Liuzhou, Qingyuan and Maoming have helped fuel housing price growth, according

to Yan.

     The Chinese government has also been restricting credit flowing to the

property market, thus negatively affecting property companies' financing.

Property developers may consider lowering prices under such pressure.

     Given that the government has not yet signaled it might change its policy

direction to stabilize property prices, relatively tight policies over the

issuance of presale licenses should continue, Yan said, with property

inventories continuing to be reined in. 

--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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