Developers cut prices over weak Chinese home price growth

China’s average house prices are expected to grow 6 percent in 2019 despite difficulty in the real estate sector and the wider struggles of the country’s economy. (Reuters)
Updated 17 September 2019

Developers cut prices over weak Chinese home price growth

  • Average increase of new house values softens amid slowing consumer demand and the Sino-US trade war

BEIJING: China’s new home prices grew at their weakest pace in nearly a year in August as a cooling economy and existing curbs on speculative buying put a dent on overall demand.

Wary of property bubbles,  regulators have refrained from stimulating sector as they try to boost an economy hit by the US tarriffs and slowing consumer demand.

Average new home prices in 70 Chinese cities rose 8.8 percent in August from a year earlier, compared to 9.7 percent in July and the weakest pace since October 2018, according to National Bureau of Statistics (NBS) data.

On a monthly basis, average prices rose 0.5 percent in August, less than July’s growth of 0.6 percent and the smallest increase since February. However, it still marked the 52nd straight month of gains. Most of the 70 cities surveyed by the NBS still reported monthly price increases, though it was down to 55 from 60 in July.

The property sector has held up as one of the few bright spots in the world’s second-largest economy.

China’s property investment grew at its fastest pace in four months in August, in contrast to a protracted slowdown in industrial output and investment.

But some analysts said the rebound in investment was likely due to developers rushing to meet government requirements before they can start sales on growing financing pressure and worries about the market’s prospects as regulators have made clear that supervision is only set to tighten.

Yang Yewei, a Beijing-based analyst at Southwest Securities, noted some developers have opted to cut prices, although the government’s tight control over new launches suggests they may not tolerate large discounts.

A resilient real estate market has provided some cushion for the world’s second-largest economy as policymakers try to revive the ailing manufacturing sector and restore flagging consumer confidence amid an escalating trade war with the US.

But regulators are walking a tightrope, as rapidly-growing household debt and ever-rising home prices have also deepened fears about a sudden market correction and concerns over housing affordability.

In a sign the government has turned more hawkish on its housing policy as it maneuvers to pump more credit into other areas of the economy, Chinese leaders said in July they would not resort to using the housing market as a form of short-term stimulus.

“The policy impact of this meeting was in full play in August,” said Xia Dan, an analyst with China’s Bank of Communications.

Slower price increases may give the authorities breathing room as they refrain from stimulating the property sector but economists at Nomura expect some tightening measures to be eased around end-2019 as weakness in the economy becomes more pronounced.

“Any attempt to stabilize growth by choking credit to the property sector could backfire,” they said, noting the sector comprises about one-quarter of China’s gross domestic product.

Price trends have been mixed lately, with some cities showing signs of rapid cooling and others still risking overheating.

In August, softer prices were mainly in tier 2 cities, including most larger provincial capitals.

Property prices there increased 0.5 percent on average on a monthly basis, easing from a 0.7 percent gain in the previous month, the statistics bureau said.

However, Nanning, the capital of Guangxi Zhuang Autonomous Region in southern China, was the top price performer in the month, with prices surging 2.3 percent on a monthly basis.

China’s four top-tier cities — Beijing, Shanghai, Shenzhen and Guangzhou — had an average gain of 0.3 percent from a month earlier, unchanged from July’s.

Out of the 70 major cities the government tracks, price growth in the smallest tier 3 cities rose the most on a monthly basis, though their increase of 0.7 percent was also in line with July’s pace.

China’s average residential property prices are estimated to rise 6 percent in 2019 from a year earlier, according to a Reuters poll published in August. The forecast was slightly higher than the 5 percent projected in the last poll conducted in March, but is significantly slower than the 9.7 percent gain seen in 2018.

Saudi energy giant to invest $3bn in Bangladesh’s power sector

Updated 22 October 2019

Saudi energy giant to invest $3bn in Bangladesh’s power sector

  • Experts say deal will usher in more economic and development opportunities for the country

DHAKA: Saudi Arabia’s energy giant, ACWA power, will set up an LNG-based 3,600 MW plant in Bangladesh after an agreement was signed in Dhaka on Thursday.

The MoU was signed by ACWA Chairman Mohammed Abunayyan and officials from the Bangladesh Power Development Board (BPDB), officials told Arab News on Monday.

According to the agreement, ACWA will invest $3 billion in Bangladesh’s energy development sector, of which $2.5 billion will be used to build the power plant while the rest will be spent on an LNG terminal to facilitate fuel supply to the plant. Under the deal, ACWA will also set up a 2 MW solar power plant.

In recent months, both countries have engaged in a series of discussions for investment opportunities in Bangladesh’s industry and energy sectors. 

During the Saudi-Bangladesh investment cooperation meeting in March this year, Dhaka proposed a $35 billion investment plan to a high-powered Saudi delegation led by Majed bin Abdullah Al-Qasabi, the Saudi commerce and investment minister, and Mohammed bin Mezyed Al-Tuwaijri, the Saudi economy and planning minister.

However, officials in Dhaka said that this was the first investment deal to be signed between the two countries.

“We have just inked the MoU for building the LNG-based power plant. Now, ACWA will conduct a feasibility study regarding the location of the plant, which is expected to be completed in the next six months,” Khaled Mahmood, chairman of BPDB, told Arab News.

He added that there are several locations in Moheshkhali, Chottogram and the Mongla port area for the proposed power plant.

“We need to find a suitable location where the drift of the river will be suitable for establishing the LNG plant and we need to also consider the suitability of establishing the transmission lines,” Mahmood said.

“It will be either a JV (Joint Venture) or an IPP (Independent Power Producer) mode of investment, which is yet to be determined. But, we are expecting that in next year the investment will start coming here,” Mahmood said.

BPDB expects to complete the set-up process of the power plant within 36 to 42 months.

“We are in close contact with ACWA and focusing on the successful completion of the project within the shortest possible time,” he said.

Abunayyan said that he was optimistic about the new investment deal.

“Bangladesh has been a model for the Muslim world in economic progress. This is our beginning, and our journey and our relationship will last for a long time,” Abunayyan told a gathering after the MoU signing ceremony.

Economists and experts in Bangladesh also welcomed the ACWA investment in the energy development sector.

“This sort of huge and long-term capital investment will create a lot of employment opportunities. On the other hand, it will facilitate other trade negotiations with the Middle Eastern countries, too,” Dr. Nazneen Ahmed, senior research fellow at the Bangladesh Institute of Development Studies (BIDS), told Arab News.

She added that Bangladesh needs to weigh the pros and cons before finalizing such contracts so that the country can earn the “maximum benefits” from the investment.

“It will also expedite other big investments in Bangladesh from different countries,” she said.

Another energy economist, Dr. Asadujjaman, said that Bangladesh needs to exercise caution while conducting the feasibility study for such a huge investment.

“We need to address the environmental aspects, opportunity costs and other economic perspectives while working with this type of big investment. Considering the present situation, the country also needs to focus on producing more solar energy,” Dr. Asadujjaman told Arab News.