China: Home Price Growth Moderated Further in February

China: Home Price Growth Moderated Further in February

• China’s new home prices (exclude affordable homes) rose yoy in 69 out of 70 cities monitored by the government for the tenth consecutive month in Feb, with the rate of increase easing for the second successive month. On average, new home values were up 8.6% yoy compared to 9.5% in Jan based on our calculations, which was the slowest increase in six months. Home prices in first-tier cities also increased at a slower pace, with the annual gains falling below 20% for all the cities for the first time since Sep 2013. Shanghai continued to lead the price increases at 18.7% yoy, followed by Guangzhou (+15.9%), Shenzhen (+15.9%) and Beijing (+15.5%). Xiamen, the second largest city in southeast China’s Fujian province, had the fifth-largest price gain for the eighth month in a row, up 15.3% yoy. Wenzhou remained the only city among the 70 cities to post a price decline in Feb, with its prices down for a 30th straight month at -4.1% yoy.

• MoM, new home prices rose in 57 cities in Feb, down from 62 in Jan and remained flat in 9 cities (vs. 2 in Jan). Four other cities saw new home prices declined MoM in Feb (vs. 6 in Jan). On average, the MoM growth in new home prices eased marginally from 0.49% in Jan to 0.35% in Feb. Xiamen led the MoM home price growth for a second consecutive month in Feb, with a rise of 0.7%. Tier 1 cities saw an average home price increase of 0.4% in Feb, down slightly from +0.5% in Jan.

• In the secondary market, 69 of the 70 cities recorded an increase in resale home prices in Feb yoy, the same as in Dec and Jan. The average prices of resale homes rose 4.7% yoy, compared to 5.2% in the prior month. Resale home prices in Tier 1 cities increased by an average of 13.5% yoy in Feb, slower than the 14.9% gain in Jan, and with Beijing posting the biggest price increase (+15.9%), followed by Shenzhen (+14.5%), Shanghai (+12.1%) and Guangzhou (+11.4%). The decline in Wenzhou’s resale home prices accelerated for a fourth straight month in Feb, with a drop of 8.8% yoy after falling 8.6% in Jan. MoM, resale home prices rose in fewer cities in Feb compared to Jan, with 46 cities showing an increase, down from 48 in the prior month. Fifteen other cities reported declining home prices (vs. 13 in Jan) and the remaining 9 were unchanged. The biggest MoM increase was a 1.1% gain in Xiamen, while the biggest decline was a 0.9% drop in Wenzhou.

• Separately, the private survey by China Real Estate Index System (CREIS) also showed average new home price gains in 100 Chinese cities easing for a second straight month in Feb yoy, with prices up 10.79% to 10,960 yuan/sqm after rising 11.10% in Jan. MoM, average new home prices in these 100 cities increased for the 21st consecutive month in Feb, with the pace also slowing for the second consecutive month from Jan’s +0.63% to +0.54%.  

• Overall, the Feb data confirm that home price growth in China has started to moderate after a number of local governments tightened their property policies in late Oct and Nov last year. In our view, gains in Chinese home prices are likely to slow down this year, with second-home buyers in Tier-1 and major Tier-2 cities facing further purchase restrictions and tighter credit requirements. The construction of more affordable housing, higher home supply due to increased land sales and a higher base last year, meanwhile, may also help ease the home price increase in these cities in the coming year. On the other hand, severe oversupply and high inventory in some smaller cities may continue to exert downward pressures on home prices in lower-tier areas.            

This message is intended only for the use of the person(s) to whom it is addressed and may contain information that is privileged or otherwise protected from disclosure. If you are not the intended recipient you are hereby notified that any use, review, disclosure or copying of this message and the information it contains is prohibited. If you receive the message in error, please notify the sender by reply e-mail and discard all its contents.   Thank You.