China's home prices gather pace but speed bumps seen ahead
* Oct new home prices +1.0 pct m/m vs +0.9 pct m/m in Sept
* Yearly growth +8.6 pct in Oct while Sept was +7.9 pct
* 65 out of 70 cities post price gains vs 64 for Sept
(Adds analysts' quotes)
BEIJING, Nov 15 (Reuters) - China's new home prices picked
up slightly in October, led by sustained gains in smaller cities
and suggesting a key driver of economic growth remained
resilient, although investor caution points to moderation
heading into 2019.
Average new home prices in China's 70 major cities rose 1.0
percent in October from a month earlier, a touch higher than the
previous month's reading of 0.9 percent, according to Reuters
calculations based on an official survey on Thursday.
While the sector's solid growth could cushion the impact of
a government crackdown on debt and escalating U.S. trade
tensions, analysts warn of challenges in coming quarters as
property investment further slows and sales contract.
The prices gains were mostly driven by China's 35 smaller
cities, which posted an average price increase of 1.1 percent in
October, accelerating from 0.9 percent in the previous month,
the National Bureau of Statistics (NBS) said in a statement
accompanying the data.
China's long-term campaign to modernise housing developments
across the country has also sustained the property market.
Analysts say the so-called shanty-town redevelopment project has
boosted property demand as residents use any cash compensation
to buy a new home when their existing one is demolished.
"The difference in price gains is very pronounced, with
transactions in central and western China supporting the
growth," said Zhang Dawei, analyst at Hong Kong-based real
estate research consultancy Centaline.
"With inventories in those regions depleted, investment
demand still high, and the shanty-town redevelopment programme
ongoing, price gains there have risen above the national
China has injected billions of yuan into its shanty-town
redevelopment programme through the central bank's so-called
Pledged Supplementary Lending (PSL) facility. The funds are
largely used as cash compensation to residents whose old homes
are being demolished.
In October, price gains in provincial capitals Guiyang,
Shijiazhuang and Wuhan were the biggest among the 70 cities
surveyed by NBS.
China's 31 tier-2 cities - which include provincial capitals
- saw an average price increase of 1.0 percent in October from a
month earlier, slowing from the previous month even though more
tier-2 cities posted gains than in September.
China's four biggest cities of Beijing, Shanghai, Shenzhen
and Guangzhou posted no change in their prices.
The data confirmed the 42nd straight month of price
increases, Reuters calculations showed, defying tougher curbs
designed to rein in a near-three year real estate boom that has
spilled over from megacities to the hinterland.
In a sign strength remains broad-based, 65 out of the 70
cities surveyed by NBS reported a monthly price increase for new
homes, compared with 64 in September.
Compared with a year earlier, new home prices rose 8.6
percent, the fastest pace since July last year and quickening
from September's 7.9 percent gain.
China's property market has been relatively resilient,
despite tighter property curbs, as many investors exploited
regulatory loopholes and turned to smaller and less-restricted
A slowdown in broader economic momentum, however, is feeding
through to parts of the property sector, a key driver of gross
domestic product. In the third quarter, China's economy expanded
at its weakest pace since the global financial crisis.
Growth in China's real estate investment in October slowed
to a 10-month low and home sales fell again, as developers held
back expansion plans in the face of softening economic
"Despite stable property price inflation in October, we
expect the property sector to cool significantly in 2019," said
economists at Nomura in a note.
"Tightening measures in large cities will not be reversed
quickly unless there are signs of a sharp decline and support
from PSL to lower-tier cities cannot continue indefinitely."
Market sentiment has turned more cautious since the start of
the second half of this year following a surge in failed land
Transactions fell sharply over the period dubbed "Golden
September and Silver October", traditionally a high season for
new home sales.
Central bank data this week showed household loans, mostly
mortgages, fell to 563.6 billion yuan in October from 754.4
billion yuan in September.
Some banks have recently lowered mortgage interest rates by
5 to 10 basis points for first-time property buyers, a likely
spill-over effect from Beijing's recent moves to cut banks'
reserve requirements to boost market liquidity, and mortgage
loans have been issued at a faster pace nation-wide.
(Reporting by Cheng Fang, Stella Qiu and Ryan Woo; Editing by
First Published: 2018-11-15 03:37:19
Updated 2018-11-15 06:59:27
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