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.

Bank jobs go as HSBC and Emirates NBD reduce costs

Updated 15 November 2019

Bank jobs go as HSBC and Emirates NBD reduce costs

  • Others have also reduced headcount amid economic downturn and property market weakness

DUBAI: HSBC Holdings has laid off about 40 bankers in the UAE and Emirates NBD is cutting around 100 jobs, as banks in the Arab world’s second-biggest economy reduce costs.

The cuts come amid weak economic growth, especially in Dubai, which is suffering from a property downturn.

HSBC’s redundancies came after the London-based bank reported a sharp fall in earnings and warned of a costly restructuring, as interim CEO Noel Quinn seeks to tackle its problems head-on.

HSBC has about 3,000 staff in the UAE, part of a nearly 10,000-strong workforce in the Middle East, North Africa and Turkey.

The cuts at Dubai’s largest lender Emirates NBD came in consumer sales and liabilities, one source said, while a second played down the significance of the move.

HSBC and Emirates NBD declined to comment.

“The cuts are part of cost cutting and rationalizing to drive efficiencies in a challenging market,” the second source said.

Other banks have also reduced staff this year. UAE central bank data shows local banks laid off 446 people in the 12 months until the end of September. Foreign banks added staff in the same period.

Staff at local banks account for over 80 percent of the 35,518 banking employees in the country.

The merger between Abu Dhabi Commercial Bank, Union Commercial Bank and Al Hilal Bank saw hundreds of redundancies.

Commercial Bank International (CBI) said it would offer voluntary retirement to employees in September, which sources said saw over 100 departures. Standard Chartered, too, cut over 100 jobs in the UAE in September.

Rating agency Fitch warned in September a weakening property market would put more pressure on the UAE’s banking sector.