HONG KONG: Average new home prices in China's major cities fell for the ninth straight month in January but showed some signs of stabilising in the top cities in a small sign that the worst may be over for the ailing property sector.
Still, market watchers say a nationwide rebound is unlikely in the near term due to a massive overhang of unsold homes — especially in the so-called "lower-tier" cities, where falls in new home prices accelerated last month.
The property industry accounts for some 15% of China's gross domestic product, so signs of a bottoming out in the sector would be good news for the government and central bank after economic growth slowed to a 24-year low last year.
Average new home prices in 70 major cities were down 0.4% in January from December, a ninth straight monthly drop following December's fall of 0.3%.
New home prices in Beijing fell 0.1% between December and January, slowing from a 0.2% fall in December from November, while Shanghai prices were flat after eight straight month-on-month falls.
"The January property price data are consistent with our view that the property market correction will last throughout 2015, with divergences among cities, as tier-one cities likely receive more support from the demand side, while the oversupply situation in lower-tier cities continues," said Nomura Securities economist Yang Zhao.
Liu Jianwei, senior statistician at the National Bureau of Statistics (NBS), noted in a statement that prices became more polarised among different cities in January, with first-tier centres stabilising while second-tier cities narrowed their declines and third-tier markets saw faster falls.
Given stabilising prices, some major developers said they were planning to raise prices for new luxury projects in prime areas this year.
"Policies since September were favourable to mass buyers but home prices came down in the fourth quarter because developers were slashing prices to meet target and get rid of inventory," said Mao Daqing, Vanke China's vice president and head of its Beijing operation.
Vanke is China's largest listed residential developer.
"In the first quarter, developers could take a breather from pushing sales so prices were back to normal levels and that's why you see declines narrowing. But it doesn't mean the market is recovering, nor are prices rising again," Mao said.
China cut mortgage rates and downpayment levels for some home buyers in September, for the first time since the 2008 global financial crisis.
New mortgage loans granted in January doubled from the previous month to 329.4 billion yuan ($52.67 billion), official data showed last week, showing Beijing's loosening monetary policy was bearing fruit.
Mao said Beijing is expected to see a large number of new property launches in the second half of 2015, with prices set above what the market was likely to bear.
"These are not luxury developments but their prices will be luxurised, because land prices have been growing exponentially in the past two years," Mao said.
Against year-ago levels, the NBS data showed new home prices fell for the fifth consecutive month, down 5.1%, accelerating from the annual 4.3% fall in December.
Of the 70 major cities the NBS monitors, 64 posted a monthly decline, down from December's 66.
With the property market and high debt levels remaining key risks, economists polled by Reuters forecast China's growth will cool further this year to around 7%, even with further stimulus measures. reuters