Home prices drop in May, first in almost 2 years

The average home price in 100 major Chinese cities recorded a month-on-month decline in May, marking a cool-down after nearly two years of consecutive rises, a report showed over the weekend.

The average house price in the 100 cities was 10,978 yuan ($1756.5) per square meter in May, down 0.32 percent from April and the first monthly drop since June 2012, the China Index Academy (CIA) said in a monthly report published Sunday.

On a monthly basis, new home prices dropped in 62 cities including Shanghai and Nanjing while it rose in 37 cities including Beijing and Tianjin. Prices remained the same in one city - Zhenjiang in East China's Jiangsu Province.

"The latest data adds to signs that China's property market is in the downturn, with first-tier cities experiencing weakening growth momentum and more lower-tier cities witnessing a drop in home prices," Xie Yifeng, an expert with the National Real Estate Manager Alliance, told the Global Times on Monday.

Shantou in South China's Guangdong Province saw the biggest month-on-month drop of 3.64 percent in new home prices, followed by a 3.59 percent fall in Hohhot, capital of North China's Inner Mongolia Autonomous Region, and a 3.21 percent dip in Baoji of Northwest China's Shaanxi Province.

"Increasing house supplies and declining transaction volumes have pressured home sales, and some property developers have had to adjust their pricing strategies to boost sales," the CIA said in the report.

More listed property developers are expected to launch promotions in June to boost their half-year financial performance, Zhang Hongwei, research director of Shanghai-based property consultancy ToSpur, told the Global Times on Monday.

The total net profit of 126 mainland-listed developers amounted to 10.62 billion yuan in the first quarter of 2014, down 6.36 percent from a year earlier, Zhang cited data complied by Wind Information Co as saying.

Baoding in North China's Hebei Province has maintained its No.1 position nationwide since April in terms of monthly home price rise, but the growth rate eased to 2.84 percent in May from 3.35 percent in April, CIA data showed.

Analysts said the rise came after rumors that the city will become a new national administrative center, taking over some of Beijing's non-core functions.

"The regional development plan to integrate Beijing, Tianjin and Hebei has boosted property prices in Baoding," Xie said.

Others warn of a housing bubble in Baoding. The market has over-responded to the regional integration, as it will be a long-term process and currently no details have been announced, Securities Times quoted Gao Binglian, secretary-general of the Hebei Real Estate Association, as saying on Friday.

Some local governments have begun to ease their grip on home purchase curbs amid the cooling property market.

Starting from Sunday, people in South China's Hainan Province who buy a home bigger than 120 square meters in its capital city Haikou can get a hukou, or Chinese household registration, for up to five family members.

"Haikou is the second city after Wuxi in Jiangsu Province to loosen the property market control through household registration reform," Zhang said. "Such a move is not only in accordance with the country's urbanization drive but also helps boost sales of large apartments."

He expects more provincial capital cities such as Shijiazhuang in Hebei and Fuzhou in Fujian to unwind property controls in this way.