House prices show signs of slowdown

Soaring house prices in major Chinese cities have shown signs of slowing down, with both the month-on-month and year-on-year growth rates dropping for the first time in two years.

Fifty-seven out of 70 major cities tracked by the National Bureau of Statistics (NBS) still saw new home prices increase in February. However, month-on-month price increases in the 70 cities declined from 0.4 percent in January to 0.28 percent in February, according to statistics released by the NBS on Tuesday.

Meanwhile, average year-on-year price growth for these cities in February is 8.64 percent, 0.86 percentage points lower than January.

It is the first time that monthly price growth and year-on-year price growth both dropped since March 2012, Zhang Xu, an analyst at Homelink, a real estate brokerage, told the Global times Tuesday.

New home prices in first-tier cities continued to rise in February. Shanghai led the rise with a year-on-year increase of 18.7 percent. Beijing's price rose by 15.5 percent. Guangzhou and Shenzhen both saw a 15.9 percent increase.

But the growth has been cooling, as it is the first time for the four first-tier cities to see year-on-year price growth below 20 percent since September 2013, according to the data from the NBS.

In February, most cities saw their lowest monthly growth since 2013, both for new homes and second-hand houses, Zhang said, noting it indicates that the price surge starting from 2012 may be close to an end.

Soaring house prices since 2012 have left the actual purchasing power far behind, Zhang said, noting the cool-down is inevitable.

The tightening of credit also contributes to declining price growth, according to Zhang.

Many banks have canceled the 15 percent discount on mortgage rates for first-home buyers, and some smaller banks even raised their mortgage rates to 130 percent of the benchmark rate.

Hui Jianqiang, research director with real estate information provider Beijing Zhongfangyanxie Technology Service, said that the narrowing price growth indicated a more rational market.

The government did not launch new macro regulation policies on the real estate market recently but the price growth still slowed, which indicates that some home buyers are holding back rather than rushing into the market, Hui said.

Meanwhile, property developers should also been cautious on investment, especially in projects in third and fourth-tier cities, he suggested.

Out of the 70 cities, only Wenzhou in East China's Zhejiang Province saw a year-on-year decline in new home prices, with a drop of 4.1 percent in February. The new home price in Wenzhou has been dropping for eight consecutive months.

Hui also pointed out that the February data may not be enough to predict the future trend due to the one-week Spring Festival holiday in February this year.

According to the NBS, the sales value of residential properties in China went down 5 percent year on year to 598.5 billion yuan in the first two months, while the amount of housing floor space sold during the period went down 1.2 percent year on year.

Poly Real Estate Group Co, a Beijing-based State-owned property developer, has launched a sales promotion for its three complexes in Guangzhou, Guangdong Province allowing home buyers to make a 10 percent down payment, lower than the usual 30 percent, media reports said.

Zhu Zhuohan, regional manager of real estate consulting firm Centaline Property's branch office in Guangzhou, said that many local property developers have even given direct price cuts. Such promotions may further encourage home buyers to hesitate, Zhang said, predicting that price growth will continue to narrow.