MNI ANALYSIS: China Property Market To Continue Robust Growth

--Despite Curbs, Underlying Demand To Underpin Sales

By Iris Ouyang

     BEIJING (MNI) - China's property market continued to cool in the first two

months of 2018 on government measures to curb a property bubble, but investment

is expected to extend its strong momentum with policy housing seen supporting

much better-than-expected property investment.

     National Bureau of Statistics data released Wednesday showed various

property statistics slowing, compared with an acceleration of property

investment growth.

     From January to February, property sales in terms of area slowed 3.6

percentage points to 4.1% from the 7.7% average growth in the whole year of last

year. The January-February growth was the lowest in more than two years.

     The deceleration reflected the Chinese government's tighter controls on the

property market since late 2016 in an attempt to rein in surging housing prices

and curb potential risks the overheating sector could bring to the whole

economy.

     --GROWTH DESPITE HURDLES

     Though sales slowed, the 4.1% growth was still not negligible considering

such a tight policy environment -- at least 180 property policies were issued in

2017 and so far this year more than 50 new policies have been announced.

     Although demand is suppressed somewhat by housing purchase quotas set by

the government, purchasing a house remains a national obsession, either for

newlyweds or the cash rich looking for an investment. Pent-up demand for a

switch to a bigger home is expected to continue supporting sales.

     Government-led shanty-town renovation, will also continue to buoy the

property market, especially investment.

     As shown in the NBS data, property investment climbed by 2.9 percentage

points to 9.9% growth over the average level of 2017. An acceleration of 2.9

percentage points in residential house building boosted the investment gain.

     But housing starts decelerated 4.1 percentage points, land sales dropped

1.2%, and property developers' funding edged down by 3.4 percentage points,

underlining the skeptical attitude of property developers.

     --REGENERATION FUNDS

     The Chinese government has vowed to renovate shanty town housing since

2009, a pet project led by Premier Li Keqiang to renovate urban and rural

housing, improving living conditions for low-income families.

     In recent years, instead of offering a new accommodation when houses were

torn down for such projects, the government increasingly gives cash to these

families. They usually then turn to buying a property unit from developers,

further increasing property sales.

     Premier Li announced at the start of the annual National People's Congress

that China will start another "three-year shanty-town renovation plan," with a

further 5.8 million houses set to be built under the project.

     With the government's campaign to develop its rental property market,

growth of the property sector, even if appearing to have slowed on first sight,

is unlikely to be truly tempered.

     As NBS Spokesman Mao Shengyong told the press earlier Wednesday, going

forward "property investment will extend relatively stable growth."

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

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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