Modest gains in China’s new home prices give authorities breathing room

Updated 15 August 2019

Modest gains in China’s new home prices give authorities breathing room

BEIJING: China’s new home prices rose in July as the property sector held up as one of the few bright spots in the slowing economy, although easing momentum in some markets took immediate pressure off regulators to unleash major new curbs to deter speculation.
Average new home prices in China’s 70 major cities rose 0.6% in July from the previous month, unchanged from growth reported in June and marking the 51st straight month of gains, Reuters calculated based on National Bureau of Statistics (NBS) data on Thursday.
On a year-on-year basis, home prices rose at their weakest pace this year in July by 9.7%, slowing from a 10.3% gain in June.
Analysts said the moderate gains were a positive sign the market was not overheating. That helped the CSI300 real estate index recoup some of its earlier heavy losses following a major slide in global stock markets.
“Today’s data is actually pretty good, reflecting that tougher stance and not alarming at all,” said David Ji, Head of Research & Consultancy, Greater China at Knight Frank, referring to central policymakers’ July decision to not use the property market as a form of short-term stimulus.
“If I were a provincial official who has a ‘key performance indicator’ to hit, I would feel happy because it is clearly telling you the property market is off the peak.”
The politburo’s pledge in July not to overly stimulate the property sector, made at a high-profile work meeting, was interpreted by analysts as a warning to the investors against heavy bets on the market.
The Chinese government has clamped down on speculative investment in the housing market since 2016 to prevent a sharp correction as prices soared. There have also been growing concerns that high house prices are pushing up the cost of business and restricting consumer spending.
But efforts by some regional governments to attract talent through home purchase incentives, along with easing credit conditions have kept prices surprisingly resilient this year.
The majority of the 70 cities surveyed by the NBS still reported a monthly price increase for new homes, although the number of cities fell to 60 in July from 63 cities in June.
In a sign the market’s resilience may be waning in parts, property investment slowed to its weakest this year, data showed on Wednesday.
Concerns linger
Chinese authorities have sought in recent years to contain risks in the often volatile property market while not undermining growth in the broader economy.
The property sector directly impacts over 40 industries in China and a fast deterioration would risk adding to pressure the economy, which is slowing due to weak domestic demand and an escalating trade war with the United States.
While tightening measures have been rolled out across hundreds of Chinese cities, price trends have been uneven across the country.
Prices are holding up better than expected particularly in top tier cities, said Rosealea Yao, China investment analyst with Gavekal Dragonomics. Average prices in the four tier-1 cities — Beijing, Shanghai, Guangzhou and Shenzhen rose — 0.3% from a month earlier, quickening from a 0.2% gain in June, NBS data showed.
Pingdingshan, a city of 4.9 million in central Henan province, was the top price performer in July, with a robust monthly gain of 1.6%.
But economists also caution that the negative impact on the sector from the central government’s increasingly hawkish stance will only start to become more pronounced in two to three months.
China’s banks extended surprisingly fewer new yuan loans in July, reflecting subdued demand. New household loans, mostly mortgages, fell to 511.2 billion yuan in July from 671.7 billion yuan in June.
In a meeting on Thursday, the Shenzhen branch of China’s central bank said it will control second half growth of the city’s new real estate loans in a “reasonable” manner, according to state-owned Shanghai Securities News. It did not give details.
Home prices in tier-2 cities, which include most of the larger provincial capitals, increased 0.7% in July versus a 0.8% rise in the previous month. And Tier-3 cities rose 0.7% on a monthly basis, in line with June’s pace.
“I expect housing policies to tighten in China, especially for local governments that has infrastructure projects to support local GDP growth,” said Iris Pang, Greater China economist at ING.


Frank Kane’s Davos diary: Swiss efficiency lapses, but so far Davos lives up to the cuckoo-clock image

Updated 22 January 2020

Frank Kane’s Davos diary: Swiss efficiency lapses, but so far Davos lives up to the cuckoo-clock image

Davos comes and Davos goes, but over the last five decades, the one thing you can rely on is Swiss efficiency, right? The trains run on time, the cuckoo clocks chime on the hour, and the snow is swept from the pathways within minutes of the first fake falling. That is the common (even cliched) view of the Alpine nation and its showpiece event, the World Economic Forum (WEF) annual meeting in Davos.

But — and whisper it very gently beneath your breath — maybe the legendary standards of Swiss efficiency are slipping as the WEF celebrates its 50th birthday. Evidence of a lapse from the highest levels of attainment came at Zurich Airport, when the luggage belt seized up inexplicably, and a full 10 minutes elapsedbefore a maintenance man came to attend to it. Tut tut.

Further signs of falling standards were on display at the railway station. The booking desks were besieged, as usual, by WEF delegates keen to complete the final leg of their journey up the Magic Mountain — a two-hour rail journey involving two stops at increasingly higher altitudes.

But only two of the 10 grills were manned, and the line grew longer and more grumpy with each passing minute. The mood was not helped when some trains were canceled and an extra hour was added to the journey. There was much muttering and dark looks shot when the train finally pulled into Klosters.

But thankfully, once you got to the heart of WEF-land, normal service was resumed. There had been a reasonable fall of snow that morning, which gave the place its usual fairytale appearance, but no traffic snarl ups as in previous years, when massive snowfall had caused the place to grind to a halt.

The shuttle buses that are the arterial life-channels of Davos — for those whose budgets do not extend to the black Mercedes limo — were running with their usual Swiss punctuality: Every 10 minutes or so, or even more frequently during peak rush hours.

These, in my experience over the past few years, are becoming frequently extended. Having battled through the registration process and attended one event at the nearby Seehof hotel, I imagined it would be easy to catch a ride on a virtually empty shuttle back to Klosters at around 9.30 p.m. But even at that hour, there was a long queue of unhappy souls waiting to make the same 20-minute trip to the other side of the mountain and their warm, welcoming hotel rooms.

It was the same thing on the opening morning of the annual meeting. I left my hotel — the homely and comfortable Cresta in Klosters — at 7 a.m. in the dark, and at minus 5 degrees Celsius. Again, there was a crowd of people standing huddled at the shuttle stop, shivering and stamping their feet.

The WEF shuttle service was up to the job, however, and I got into the Congress Hall with little trouble. The airport-style screening process — maybe a little more thorough than usual in view of the impending arrival of US President Donald Trump — passed smoothly. One request though: Please WEF, install some hot-air machines in the security hall. The body shock when you remove outer clothing to pass through the metal detectors was wicked.

Then down to business, which for a journalist at Davos means finding somewhere in the congress complex where you can rest a laptop while also providing a good people-watching vantage point. Over the years, I have learned that the Central Lounge — strategically located between the main plenary meeting halls and the (private) members lounge and bilateral rooms — is the perfect spot. Now, who will come my way in Davos 2020?