Prices in China’s sizzling property market, a major driver of growth in the world’s second largest economy, accelerated in March on a monthly basis, shaking off the impact of recent cooling measures introduced to dampen speculative demand.
Average new home prices in China’s 70 major cities rose 0.6 % in March from February, higher than the previous month’s reading of 0.3 %, according to Reuters calculations based on an official survey on Tuesday.
The National Bureau of statistics, which published the report, said on Tuesday while prices in 15 major cities appeared to be “stable” on-month, price growth for new homes in smaller third-tier cities quickened 0.4 percentage points.
Economists say more tightening measures are likely as price momentum builds, but with price gains and sales in top-tier cities appearing to be peaking, future curbs are likely to be more targeted.
“I think the tightening focus will shift to more medium- and small-sized cities in the future because sales have fallen quite significantly in first-tier cities,” said Zhou Hao, emerging markets economist at Commerzbank AG in Singapore.
Compared with a year ago, new home prices in 70 cities rose 11.3 percent, slowing from February’s 11.8 percent gain.
Tuesday’s data also showed prices gained momentum in the resale market, which is seen as more indicative of actual demand as it is not subject to the kinds of price caps widely applied to new projects. Price growth in the residential resale market quickened to 0.8 percent month-on-month in March from 0.4 percent in February, a Reuters’ calculation showed.
Sharper price gains highlight the challenge authorities face in taming an overheating market without bursting a speculative property bubble.
“Most of the (tightening measures) are quite marginal. Tightening is not as serious as previous cycles,” said Rosealea Yao, a Beijing-based property analyst at Gavekal Dragonomics.
Beijing, a bellwether of national policy direction, announced unprecedentedly harsh purchase restrictions on March 17 to curb speculation. Over the past two weeks, at least 50 cities have implemented tougher measures.
As China has moved to a city-based approach to tackle its polarised market, home prices in many smaller cities with no purchase restrictions picked up most visibly, but prices also rebounded or had smaller month-on-month declines in most of the biggest cities.
Prices for new units in Beijing rose for the first time since October 2016 on a monthly basis and rose 19 percent from a year ago.
The NBS said in a note accompanying Tuesday’s data that Beijing’s daily new home transaction volumes fell in March after the tougher property curbs were introduced, though it did not provide a percentage change.
Shanghai and Shenzhen’s prices declined on a monthly basis although Shenzhen’s fall was not as large as the previous month.
STRAPPED FOR CHOICE
Despite the curbs and signs of price moderation, investors remain bullish about China’s biggest cities.
“I think Beijing prices will definitely rise further. The curbs are oppressing the market but prices may double next year (when the curbs are removed),” Xu Zhenghua, a property investor told Reuters during the Beijing Real Estate Trade Fair last week.
China’s property sales growth eased in March after a strong rebound in the first two months of the year, though growth in property investment picked up pace again.
Meanwhile, appetite for Chinese property is also driven by a lack of investment alternatives, analysts and investors say.
Central bank data published on Friday showed a surge in medium- and long-term household loans, mostly mortgages. It made up 44 percent of total new yuan loans in March, compared with 32.5 percent in February.
Gavekal Dragonomics’s Yao said while more tightening is expected, policymakers may wait to see the impact of March’s curbs before releasing new ones.
“They may hold off for a few weeks,” she said. “There will be a soft patch for prices and sales over the next few months.”