Up or Down? (January 2019)
22/02/2019
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Image: BWPI

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The house market continues its cooling trend in the new year, as we see the newly released data from the Statistic Bureau of China. Coupled with the declines in sales volume,  weakening monthly price gains recorded in January.  By contrast,  the year on year price gains have accelerated to about 10 percent, according to our calculation. This may imply that there is still a strong underlying demand for housing.
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On an annually basis, the newly built home prices of the tier-1, tier-2 and tier-3 cities rose 3.3 percent, 11.6 percent and 11.0 percent in January, compared to the same period last year. Among the four tier-1 cities, Guangzhou reported the highest price rise (9.7 percent), followed by Beijing (2.8 percent) and Shanghai (0.9 percent). Shenzhen saw a 0.1 percent price loss in January.

​Price Trend
New house prices in 70 Chinese cities reported a minor monthly growth of 0.61% in January, which is lower than 0.77% increase in the previous month. According to our calculation, this rate recorded the lowest in recent 9 months.   
Fewer cities experienced a month on month increase in January, 58 of the 70 cities reported price gain, compared with 59 cities in a month earlier. Dali where the price increased 2 per cent is the biggest gainer among the price increasing cities. On the other hand, 8 cities reported price decrease, and the prices in 4 cities remain unchanged. 
The difference in price growth between different city scales closed. The average rate of monthly growth in the first tier cities of Beijing, Shanghai, Guangzhou and Shenzhen remains at a relatively low level, though there is a small rebound driven by Guangzhou in December. The second and third tier cities have been facing a continuous downward pressure on the growth rate of housing price.
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Image: China.com
Looking at the price changes of second-hand market could be a better way to observe the market condition. Data shows the monthly prices in 41 cities rose in January, down from 47 cities last month and cities number marked the 5th straight decline since September 2018.

Sales Condition
Falls in Sales Volume
As we see a continuous cooling housing market, buying sentiment becomes weaker and many homebuyers expect continued falls in the housing price. Developers in China have already reported a sales drop for January.
Public filings show the top 3 developers, Evergrande, Vanke, and Country Garden had home sales declines in January 2019. Evergrande and Vanke saw 32.9 percent and 28.1 percent declines to 43.2 and 48.9 billion yuan on a year on year basis. While Country Garden reported its contract sales of 33 billion yuan, a 28.1 percent drop according to Centaline's estimate.

​While the high comparison base in the same period in 2018 was also one of the reasons for the sales declines in January, the gradual cooling of the housing market, especially the third- and fourth-tier cities may also contribute to this change..

Policy Condition
City-based approach with modest policy easing
 
While there is little evidence that the central government has changed the regulatory tone of the housing market, more local based policy measures has been encouraged to provide more autonomies to the local government. At the local level, modest policy easing on home purchases restrictions, bank mortgage rates has been introduced to the cities such as Heze, Guangzhou and Zhuhai.

Many expect that more local governments will lift the tight control measures to combat with economic slowdown. The flexibility provided to the local governments to loosen the measures however, may not have a large impact on the overall market. According to a CICC research, the market trend will only be recovered after national adjustments in financial and taxation policies, control loosening on the local market tends to have limited effects.

Summary

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Image: BWPI
​I. Sales Prices of Newly Constructed Residential Buildings (excluding affordable housing).

Year-on-Year price changes:
  • Increased in 68 cities (top 5 cities are Xi'an 23.5%, Hohhot 22.6%, Haikou 20.7%, Dali 20.3%, Guiyang 19.4%.)
  • No city remained at the same level.
  • Decreased in 2 cities (Shenzhen -0.1%, Xiamen -0.3%)
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​​II. Sales Prices of Second-Hand Residential Buildings.
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​Year-on-Year price changes:
  • Increased in 66 cities (top 5 cities are Hohhot 19.1%, Jining 17.1%, Dali 15.6%, Kunming 15.1%, Xi'an 14.8%.)
  • No city remained at the same level
  • Decreased in 4 cities (Fuzhou -0.5%, Beijing- 1.4%, Shanghai-2.8%, Xiamen -4.4%)
 
​Read the original article at stats.gov
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Up or Down? (October 2018)
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