Easing fails to lift home sales

A housing project in Hangzhou, Zhejiang province. In the first eight months of the year, national home sales dropped 10 percent by floor space over a year earlier and slumped 10.9 percent by value, the National Bureau of Statistics said. LONG WEI/CHINA DAILY

Only one city in China saw new-home prices rise in August, the weakest housing data in the past three-and-a-half years, the National Bureau of Statistics said on Thursday.

New-home prices fell month-on-month in 68 of the 70 major cities monitored by the NBS and remained flat in one. It was the gloomiest pricing report since January 2011, when the government changed the way it compiled the data.

The only city where prices rose was Xiamen, Fujian province, where average home prices edged up 0.2 percent.

While prices fell in only 64 cities in July, the decline eased in August, when the biggest drop was 2.1 percent versus 2.5 percent in July.

Prices in the four top-tier cities－Beijing, Shanghai, Guangzhou and Shenzhen－continued to weaken, albeit more slowly than in July. Shanghai and Guangzhou each saw a 1.3 percent slump in August, while in Shenzhen and Beijing, prices retreated 1.2 percent.

The continued weakening that started at the beginning of the year defied the fact that 37 of the 46 cities that imposed limits on home purchases since 2010 have removed or eased such restrictions to stem the decline in sales.

In the first eight months of this year, national home sales dropped 10 percent by floor space over a year earlier and slumped 10.9 percent by value, the NBS said earlier.

Widespread hopes that the weak sales trends would be reversed in September, a traditionally brisk homebuying period, were also dashed.

In the first 15 days of September, of the 20 cities monitored by Shanghai-based E-house China R&D Institute, home sales dropped 6 percent by floor space from the previous month. First-tier cities posted the steepest drop of 18 percent, compared with a 6 percent average drop in second-tier cities.

"Even though local governments intervened, the road to recovery is bumpy," said Yan Yuejin, an analyst with E-house China R&D Institute. "Local governments may feel more compelled to let banks rev up the credit. Developers may feel it more urgent to unload their properties, and are cutting prices to get more sales."

The latest proactive measures came from Hubei province. The centrally located province issued a document this week, reiterating that mortgage rates for first-time homebuyers can be as low as 70 percent of the central bank's benchmark rate, a discount hardly seen since in the past year.

First-time homebuyers also would enjoy a 50 percent incentive in the deed tax. According to private property research agency China Index Academy, however, the effect of such measures will depend on whether banks comply with the policy.

Shen Minggao, head of China research at Citigroup Global Markets Asia Ltd, said sooner or later China will have to ease home purchase restrictions in all cities, including first-tier ones. Meanwhile, economists from UBS AG and Mizuho Securities Asia Ltd predicted that the next step for the government is a mortgage rate cut.