Home prices drop in more Chinese cities

China's property sector showed new signs of cooling in April, with more Chinese cities reporting month-on-month drops in prices and fewer cities reporting gains, official data showed on Sunday.

Of a statistical pool of 70 major Chinese cities, new homes in eight cities saw month-on-month price declines in April, double that for March, the National Bureau of Statistics (NBS) said in a statement.

A total of 44 cities saw month-on-month price gains in new home prices last month, down from 56 for March and 57 for February, the NBS data showed. Among the 44 cities with rising new home prices, growth decelerated in 31 last month.

The average month-on-month price increase for new homes slowed notably to 0.1 percent last month from 0.3 percent in March. The biggest month-on-month price increase was recorded in the southeastern coastal city of Xiamen, which rose 0.4 percent month on month from March.

Hangzhou, in east China's Zhejiang Province, saw its new home price dropping the most of the 70 cities, down by 0.7 percent from March.

The other seven cities with month-on-month declines in new home prices were Ningbo, Wuxi, Wenzhou, Jinhua, Anqing, Ganzhou and Huizhou.

For existing homes, prices increased in 35 cities month on month in April, notably down from 42 cities in March and from 46 in February, according to the statement.

Another 22 cities saw month-on-month declines for existing homes, with Hangzhou dropping the most, by 0.8 percent. Hefei, capital of east China's Anhui Province, recorded the biggest month-on-month increase for existing homes -- 0.7 percent.

Year on year, prices of new homes increased in 69 cities last month, even though 67 of them saw the rates of growth moderating, said Liu Jianwei, a senior statistician at the NBS.

In 61 cities, the growth rates also decelerated in the prices of existing homes in April, Liu said.

Zhang Dawei, chief analyst at real estate agent Centaline Property, said China's property sector is showing a clear trend of cyclical adjustment as house prices declined in more cities across the country.

Zhang attributed the current property downturn to two reasons -- reduced mortgage availability to home buyers and a tightening in loans for developers, and the end of national house under-supply with some third- and fourth-tier cities hit by over-supply.

Market expectation has changed and more potential buyers have chosen to take a wait-and-see attitude, forcing property developers to lower prices to increase sales, Zhang said.

A string of signs have pointed to a property downturn in China. Last Tuesday, the real estate development climate index, also compiled by the NBS, dropped 0.61 points from March to 95.79 points in April. It has declined month on month for three consecutive months.

The cooling of the property sector was backed up by new inventory data released on Monday by E-house China R&D Institute, a housing research center headquartered in Shanghai.

By the end of last month, combined new residential housing inventories in 35 cities tracked by the institute stood at 248.91 million square meters, the highest level in five years.

Chang Jian, chief China economist at Barclays, said weak sales and cash flow pressures amid a tightening in loan and trust financing have prompted some developers to cut prices, which, in turn, caused home buyers to adopt a wait-and-see attitude at the start of 2014.

The current housing market correction in China, especially with respect to the downward house price adjustment, is still at an early stage compared with the downturn in 2011, Chang said in a research note.

The Chinese government should tolerate a bit more of a correction in the property market to let price-demand adjust according to market forces, before embarking on any broad-based easing, she added.

On Tuesday afternoon, China's central bank said in a statement that commercial banks should be quicker in approving and issuing loans to qualified home buyers, citing a requirement from a meeting held on Monday.

Commercial banks should "properly allocate credit resources and prioritize credit demand of first-home buyers," the statement said.

Most analysts interviewed by Xinhua said they expect the property market to continue cooling this year, and housing prices in cities with large inventories are very likely to see more price declines.

Housing prices in first-tier cities and most second-tier cities are unlikely to experience "big corrections," said Zhang of Centaline Property.