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Chinese property prices soared again at the start of 2014 but their year-long run of accelerating increases showed signs of losing steam amid the government’s moderate policy tightening.
New housing prices in China’s 70 biggest cities rose 9.6 per cent year on year in January, down from 9.9 per cent in December, according to a population-weighted average. Of the 70 cities monitored by the national bureau of statistics, six posted price declines from the previous month, up from just two in December.
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The Chinese government has long used on-again, off-again restrictions to try to tame the country’s frothy property market. It has encouraged developers to boost supply of new homes as millions move from the countryside to cities, but also has attempted to stop speculators from buying up homes and driving up prices.
After clamping down on the property market for much of 2012, leading prices to edge down, the government held off from implementing new controls last year, and prices took off once more. Increases were especially steep in the country’s biggest, wealthiest cities, with prices up more than 20 per cent.
New home prices in Shanghai and Beijing rose 20.9 and 18.8 per cent in January from a year earlier, respectively, slowing a touch from their 21.9 and 20.6 per cent increases in December.
The government has gradually tightened monetary conditions since the middle of 2013, raising the cost of funding for banks and, in turn, nudging up mortgage costs for home buyers. Some analysts believe that an even bigger threat to the market is President Xi Jinping’s anti-corruption campaign, which is beginning to stem the flow of cash into high-end properties.
Developers across the country reported slow starts to the year in terms of transaction volumes in January and early February, potentially setting the stage for price discounts.
The 21st Century Business Herald, a financial newspaper, reported that multiple banks had decided to halt issuing all loans to property developers. Other local media said the report was incorrect, noting that banks had long been restricting loans in smaller cities but continuing to provide financing to developers in bigger areas.Concerns that the government could take more stringent measures to rein in price increases weighed on the shares of Chinese property developers on Monday.
Shares in Vanke, the country’s biggest listed property developer, fell 6 per cent in morning trading on the Chinese stock market, with other developers’ shares also under heavy selling pressure.
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