By Laura He, MarketWatch
HONG KONG (MarketWatch) — China’s property prices are showing further signs of a slowdown amid government curbs, with Beijing’s prices for second-home purchases falling in April by the most in two years, while newly built residential housing price gains eased for the sixth straight month.
But government action to address the problem may help alleviate the situation, some economists say.
According to latest numbers from China’s National Bureau of Statistics (NBS), released Sunday, prices for second homes in Beijing dropped 0.2% in April from the previous month, reversing a 0.2% month-on-month gain in March.
Meanwhile, newly built non-government residential housing prices rose 11.2% in April from a year ago, down from the 13% year-on-year increase in March. The price gains have slowed for the sixth straight month.
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Among the 70 medium to large Chinese cities surveyed by the NBS, only 44 cities have seen month-on-month price increases for new residential housing in April, down from 56 cities in March, while 8 cities had lower prices in April, compared with just 4 in March.
The weakness in property price growth appeared to worry stock investors on Monday. Property shares suffered in both Hong Kong and Shanghai, dragging the major indexes lower.
Among top losers in Hong Kong, China Resources Land /zigman2/quotes/202417326/delayed HK:1109 -1.25% fell 2.4%, while Country Garden Holdings /zigman2/quotes/201681083/delayed HK:2007 -1.47% and China Overseas Land & Investment /zigman2/quotes/205731176/delayed HK:688 -1.42% dropped 1.9% each.
In Shanghai, China Merchants Property Development declined 1.9%, and Poly Real Estate Group /zigman2/quotes/201864015/delayed CN:600048 +1.03% lost 1.2%.
The losses compared to a 0.6% drop for Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -0.17% , and a 1.3% retreat for the Shanghai Composite Index /zigman2/quotes/210598127/delayed CN:SHCOMP +1.84% .
Analysts said the deceleration in home-price growth was partly due to an increasingly wait-and-see sentiment in the markets, as developers are beginning to cut prices under weak sales and cash-flow pressures amid tightening credit conditions.
“We think the property market will get worse before getting better, especially in areas with oversupply,” analysts for Bank of America Merrill Lynch said in a note on Monday.
Their views echoed those of Jian Chang, an analyst for Barclays, who believes China’s credit tightening has reduced the mortgage availability to households and led to weaker sales, forcing developers to cut prices and thus prompting home buyers to hold back on purchases so far this year.
The cooling in the property market, combined with a slowing economy, has raised the alarm for the central government.
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Thousands of Bharatiya Janata Party supporters welcome India's next prime minister Narendra Modi to New Delhi ahead of his talks to form a new government. Photo: AP
The People’s Bank of China (PBOC) last week urged commercial banks to provide more credit to first-time home buyers and prioritize the issuing of mortgages, according to a statement on the central bank’s website.