The past two months have seen a rapid slowing in house price growth in China’s tier 1 cities as for new housing, annual price growth in tier 1 has now slowed to 1%yr at September, from 8%yr two months ago and its peak of 31%yr in April 2016, explains Elliot Clarke, Research Analyst at Westpac.
Key Quotes
“Whereas it was initially Shenzhen that led the tier 1 aggregate down, now the weakness has a broad base. In addition to the 4%yr fall seen in Shenzhen, prices are also flat in Shanghai and Beijing. Guangzhou continues to experience robust annual gains, 9%yr in September. But that is half the growth pace of three months earlier, signalling a marked shift in momentum there as well.”
“While the deterioration in momentum has been most obvious in the tier 1 cities, where authorities’ actions have been focused, annual price gains are also decelerating in tier 2 and tier 3.”
“Of the 70 cities that report across tier 1 to 3, seventeen experienced monthly price declines in September. That compares to just six three months ago.”
“In tier 2, annual price growth has now fallen below 6%, from 9% three months ago and a peak near 12% in October 2016. Only one of the tier 2 cities has experienced price declines over the past year (Chengdu, –2.8%yr).”
“Similarly in tier 3, price growth has slowed to 7%yr after remaining near 9% between November 2016 and August 2017. None of the tier 3 cities are yet to see price declines versus a year ago, despite the increase in monthly losses.”
“Price action in the established market continues to map to the new home market. Prices are up 4%yr in tier 1 and 6% in tier 2/3. In September, thirteen cities reported price declines for established homes, up from just two in March.”
“It is evident from the activity data that real estate investment will slow materially in 2017/18. Growth in project starts has followed sales growth down to near zero. And the increase in floor space under construction is negligible versus history. Still, contrasting the construction activity trend to the rate of gain of land prices highlights that developers remain optimistic over the longer-term, shoring up their pipeline of land while limiting current new dwelling supply.”
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