The Chinese government has introduced several cooling measures on home buying and lending since last October.
The growth of home prices in China marginally weakened for the fourth consecutive month in January as demand declined further in major cities, reported Reuters, citing data from the National Bureau of Statistics (NBS).
On average, prices of new homes in 70 large cities rose by just 0.2 percent in January on a monthly basis compared to the 0.3 percent gain in December. This represented the fourth month of softer price growths, with experts expecting further falls over the next 12 months.
“I think home prices have basically peaked. Considering the yearly growth is still strong, prices are likely to keep falling this year,” said Zhou Hao, a Singapore-based economist at Commerzbank.
On an annual basis, overall home prices still increased significantly by 12.2 percent in January, albeit slightly lower than the 12.4 percent rise in December.
In particular, values in Beijing, Shanghai and Shenzhen climbed sharply by 24.7 percent, 23.8 percent and 18.2 percent respectively, but monthly price growths in the last two cities softened as measures by the local authorities hit demand.
However, some experts warned that the slowing price growth could have a bad effect on producer prices, which is close to a six-year high due to the record cost of raw materials that is impacting companies’ ability to repay their rising debt.
Analysts fear such a situation could cause a cycle of low real estate investment, in turn leading to weaker economic growth, which stood at 6.7 percent last year, or the lowest rate in more than 25 years.
China’s government has been worried over ballooning debt and a property bubble in an economy that has recently slowed down. It has introduced several cooling measures on home buying and lending in more than 20 cities since October last year.
Furthermore, financial institutions in several major cities like Beijing have slashed discounts on interest rates for first-time home buyers since the start of 2017. However, new lending in January still reached 2.03 trillion yuan, the second highest monthly level on record.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
