China home prices up for fourth month

Date

10/4/2015 3:53:49 AM

(MENAFN- Khaleej Times)

Home prices in China rose for a fourth consecutive month in August offering hope that the ailing property sector is becoming less of a drag on the slowing economy.

But analysts do not expect a full-blown turnaround any time soon as a huge overhang of unsold homes discourages new construction and investment in all but the biggest cities.

Average new home prices inched up 0.3 per cent in August from the previous month according to Reuters calculations based on data released by the National Statistics Bureau or NBS on Friday the same pace as in July.

Price gains were recorded in 35 of the 70 cities the NBS surveyed up from 31 in the previous month. The NBS said that on a nationwide basis prices rose 1.7 per cent year-on-year in August marking the first increase since September 2014. A Reuters calculation based on the bureau's data showed prices were still down 2.3 per cent from a year ago.

The property sector accounts for 15 per cent of China's gross domestic product so even modest signs of improvement would relieve some pressure on the economy which is expected to expand at its slowest pace in a quarter of a century this year.

But economists at Standard Chartered say sentiment in the property market is still fragile and believe it remains one of the biggest headwinds for the economy especially as growth in other areas slows.

A StanChart survey of 30 non-listed developers in medium-sized cities such as Hangzhou in July found that inventories are being worked off only slowly construction activity remains weak and access to financing is becoming more difficult despite lower funding costs.

"Our surveyed developers expected further policy loosening in the second half of 2015" StanChart said. Indeed China relaxed its housing investment rules for the second time in two weeks on September 1 by slashing the downpayment level for some second-home buyers. Days earlier it loosened rules for foreigners to buy real estate.

While home sales and prices have picked up growth in China's property investment in the first eight months of the year slowed to 3.5 per cent from a year earlier the lowest since early 2009 while new construction starts plunged by nearly 17 per cent depressing demand for materials from cement to steel. Moreover price trends are uneven across the country with those in smaller cities such as the northeastern city of Dandong continuing to fall albeit at a milder pace.

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