Beijing has been ramping up efforts to curb property prices. It has increased the minimum down payment on second homes, restricted home purchases, and curbed lending. And all of this seems to be working. 59 of 70 major cities saw home prices increase at a slower pace in September, than a year ago, according to the National Bureau of Statistics (via Xinhua).
Wenzhou was the only city where new home prices fell from a year ago. They also saw a 1.7% drop in the second hand market. Societe Generale analyst Wei Yao writes:
“Since Wenzhou leads other places in terms of liquidity conditions, we think this is also the direction where other cities’ housing markets will follow in the coming months.”
On a month-to-month basis, 17 cities saw new home prices fall, which compared to 16 a month ago. Prices stayed unchanged for 29 cities.
Credit availability to the sector continues to tighten and starts to new real estate projects have also been slow according to Yao.
Recently, China’s Golden week of holidays, which is prime season for real estate sales, also saw disappointing transaction volumes. While the central government is keen on slashing property prices, local governments are more reluctant because it still drives local economies.
Nevertheless, Yao thinks the current pace of the property correction isn’t quick enough to satisfy the government. From Yao:
“The cues from Beijing indicate a target price correction of 5% – 10%. If we read the government correctly, we are still a few more months away general policy easing. Considering the difficulties of managing the pace of deflating a bubble, we expect some risk of undershooting and risk of 10~20% downside in China’s property prices.”
Photo: Societe Generale