Realty growth sinks to single-digit level
A man inspects a property model display on June 14, 2014 in Rizhao, Shandong province.
Housing sales remain soft despite several policy easing measures announced by government
First-quarter investment in the real estate industry plunged to the lowest point in nearly six years, according to data released by the National Bureau of Statistics on Wednesday.
Investment in the property sector, a pillar of China’s fixed-asset investment, expanded by 8.5 percent year-on-year, dipping from 10.4 percent in the first two months.
The pace of growth was the weakest since July 2009, which was the aftermath of the global financial crisis, and a far cry from the 30 percent-plus rates recorded just four years ago.
In the previous property downturn, which occurred in the second and third quarters of 2012, growth rates remained above 15 percent.
“China’s property sector is still in a bad way. Prices continue to slide. Without a turnaround in loan growth, it’s difficult to see a rebound in real estate,” said Tom Orlik, chief Asia economist of Bloomberg.
Statistics suggest that investment growth in the sector is set for further slowdowns, which would drag down overall economic growth.
For example, funds raised by developers in the first quarter contracted 2.9 percent year-on-year, while new housing starts plunged 18.4 percent.
Yu Bin, a leading scholar with the Development Research Center of the State Council (cabinet), told a news conference earlier that real estate investment growth will decelerate further from 10.5 percent last year to about 7 percent this year. That would be about the same pace as the target for GDP growth.
In the longer term, property investment growth will stabilize in the 7 to 8 percent range, he said.
Investment is a lagging indicator that usually runs about three months behind changes in actual home sales, experts said. Given that relationship, last month’s sales performance implies that investment will stabilize in the second half of this year.
First-quarter housing sales by area fell 9.8 percent, the NBS said. That was a big improvement from the whopping 17.8 percent contraction in the first two months.
Calculations by China Daily show that in March, home sales were just marginally below the year-earlier levels: 0.9 percent down by area and 0.2 percent lower in value.
The NBS does not provide single-month data.
However, policy loosening in late March failed to ignite sales, to the surprise of many observers. After a soft patch in the first week of April, sales in the second week continued to fall.
According to the China Index Academy, the research branch of SouFun Holdings Ltd, sales in the 38 cities it monitors fell 11.2 percent last week, compared with the previous week.
In late March, the central bank said that commercial banks could reduce their minimum down-payment requirements to 40 percent from 60 percent for buyers of second homes who have outstanding mortgages on their first homes.
Separately, tax authorities said that individuals selling an ordinary home would be exempt from the usual 5.5 percent tax if they had owned that unit for more than two years, down from five years previously.
The housing authorities also said that the government would curb land supplies in second-and third-tier cities in an effort to rein in oversupply there.
Ding Zuyu, president of China Real Estate Information Corp, said that several factors had undermined the effectiveness of the policy changes.
For one thing, the Qingming (tomb-sweeping) festival is considered an inauspicious time to buy a home. The holiday fell from April 4 to 6.
Another factor, according to Ding, is that the implementation of the support policies is taking time to trickle down to the local level. Further, supplies of new apartments dwindled during the festival.
As the policies take effect nationwide, their impact will be fully felt starting from the second half of April, he said.
