Property market still in the doldrums

A boy flies a kite beside a massive residential project in Luoyang, Henan province, on March 8. Many local governments have ramped up efforts to bolster home sales after the moves to ease purchase restrictions barely worked. (Photo: Huang Zhengwei/For China Daily)

Interest-rate cuts, removal of curbs fail to drive up home prices in Feb.

Two interest-rate cuts in three months and the removal of property purchase curbs have so far failed to revive China's housing market, with the pace of price declines accelerating in February.

However, the weak data could bring a policy windfall from the government with more support measures, analysts said.

New home prices fell in 66 of the 70 cities tracked by the National Bureau of Statistics, compared with 64 in January, the agency said on Wednesday. Prices rose in two cities and were unchanged in another two.

These findings translate into a 0.46 percent month-on-month decline, according to calculations from the research team of Bank of Communications Ltd, compared with a 0.43 percent drop in January.

Existing-home prices dropped month-on-month in 61 cities, the same as in January.

The picture was mixed in the first-tier cities. Existing-home prices in Shenzhen and Shanghai rose compared with January, but prices fell in Beijing and Guangzhou.

Liu Jianwei, an economist with the NBS, said the decline reflects slack sales during the Lunar New Year holiday, which fell in mid-February this year.

Previously released NBS data showed that in the first two months, residential sales slumped 17.8 percent year-on-year by area and 16.7 percent by value.

Liu said historical data indicated that sales in March would "significantly increase".

Persistent weak data have convinced observers that more stimulus policies are in the pipeline. Citing an expert with the Ministry of Housing and Urban-Rural Development, the Beijing-based China Times reported that the down payment ratio for second homes would be reduced to 50 percent from a minimum of 60 percent at present.

Adding to the hope was Premier Li Keqiang's supportive tone in a news conference on Sunday, when he said China would support demand from first-home buyers and those seeking to upgrade.

Jingsong Du, a property analyst at Credit Suisse Group based, said that comment was "the most accommodative in the past 10 years".

Tom Orlik, chief North Asia economist of Bloomberg, said that the message from Li confirmed the belief that the policy has swung full circle, from controlling speculators to bolstering demand.

However, sales remain weak. One reason, Orlik said, was that as prices fall, speculators find other places to park their cash.

"A second reason is that the credit torrent that drove the housing boom in past years has dried to a trickle," he said, noting that despite cuts in interest rates and banks' reserve requirement ratios, loan growth continues to slow.

Many local governments have ramped up efforts to bolster sales after finding that easing curbs on purchases had little impact. China Business News reported that the city of Ningbo in Zhejiang province may offer subsidies to homebuyers and acquire unsold units from developers to be used as social housing.

Fujian, Sichuan, Anhui, Jiangsu and other locations have taken similar steps to reduce inventories, the newspaper said.

Shanghai's housing authorities denied media reports that the city will scrap or loosen its buying restrictions. But banking sources in the city said that some minor adjustments to buying conditions would be announced soon.

Still, a broad-based recovery is not yet in sight. So far this month, the widely expected sales turnaround has yet to materialize.

Sales in the first half of March in the 50 cities monitored by the China Real Estate Information Corp were flat year-on-year, and the first half of March 2014 was already a weak base of comparison.

In Beijing, sales slumped 35 percent year-on-year, although sales in Shanghai rose 23 percent.

Yang Kewei, an analyst with the CRIC, said the sales slump in Beijing was largely because few new projects were released by developers in March.

Both builders and homebuyers in Beijing were waiting for more clarity from the government.

"Both sides are staying on the sidelines in anticipation of concrete policies in April, and transactions will warm up then," Yang said.