MNI Analysis: China Property Market Cools on Strict Govt Rules

     BEIJING (MNI) - China's real estate investment and sales both moderated in

April as the government took further action to restrict the growth of the

industry on concerns it may risk financial stability.

     Investment in properties in the first four months eased to 10.3% from 10.4%

in March, according to data released Tuesday by National Bureau of Statistics.

The growth was attributed to 0.9 percentage point acceleration of investment

growth in the residential real estate segment in the January-April period, while

urban renewal and subsidized housing initiatives partly offset reduction in

private investment.  

     Property sales showed a clear downward trend, slowing to 9% in the first

fourth months from 10.4% in the first quarter.  

     Various levels of Chinese authorities have placed rounds of tightening

curbs since the second half of 2015 on concerns of the bubbles may trigger

financial crisis. As the central government set its policy direction, local

governments followed to restrict purchases by non-local residents and those

already owning homes. 

     --REGIONAL DIFFERENCES

     Property sales rose 1.3% from January to April, 2.3 percentage points lower

than the first quarter, the lowest since 0.2% drop in the January-May period of

2015. Both sellers and buyers exerted impact: developers hoarded land and houses

hoping for a change in the tight policy, while speculators were barred from home

purchases. People with real need for housing were discouraged by higher mortgage

rates.

     The industry also varied by regions. Investment in northeastern and western

China accelerated from the first three months by 9.4 percentage points and 0.3

percentage points, respectively, while many other regions experienced slowdown.

That indicated that urbanization in these under-developed regions continues to

be robust and is supported by authorities. 

     Housing starts slid 2.4 percentage points to a growth of 7.3% in

January-April from 9.7% in the first three months. New constructions for

residential property in the first four months grew 9.4%, down from 12.2% ytd in

March.

     Property companies' financing and refinancing pressure weighed down on

housing starts and land acquisitions. Funds of property developers grew 2.1% in

the first four months, compared with 3.1% growth in the first three months.

     --UNCERTAIN OUTLOOK

     Outlook of the property sector, contributing to more than half of China's

annual growth remains uncertain. Authorities on the one hand place financing

restrictions on developers, such as restricting them selling bonds, while

discouraging buyers with stringent requirements. 

     However, subsidized housing and urban renewal programs will likely absorb

some of the policy-imposed reduction in sales. 

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

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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