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Green shoots in China’s flagging property market

  • Author:naky
  • Source:www.diecastingpartsupplier.com
  • Release on:2015-07-10
Chinese housing prices rose at their fastest monthly pace in 18 months, a private survey showed on Thursday, the latest sign that the country's property market, a key growth driver, is recovering from a year-long slump.

The slumping property market is a major reason growth in China’s economy slowed to a six-year low in the fourth quarter. Economists estimate that building, sale and outfitting of apartments accounts for about a quarter of the country’s gross domestic product.

Average home prices rose 0.56 per cent in June from a month earlier, data from the China Index Academy’s survey of 100 cities show, up from a 0.45 per cent gain in May and the fastest growth since January 2014. In spite of the new figures, however, analysts expect the market to recover only gradually.

“A nationwide property market recovery will remain a prolonged and strenuous process, dragged by large inventory overhangs in second and third-tier cities,” Australia and New Zealand Banking Group analysts led by Liu Li-Gang wrote in a note.

The central bank has slashed benchmark interest rates four times since November, helping to lower mortgage costs. The People’s Bank of China has also cut the amount of cash that commercial banks must hold in reserve at the central bank, increasing liquidity in the financial system.

ANZ estimates that a 1 percentage point increase in property prices translates to 0.2 percentage points of GDP growth.
Analysts also say that some investors are now taking profits from the Chinese stock market — which hit a seven-year high on June 12 but has tumbled more than 20 per cent in the past two weeks — and investing them into property, which looks more fairly valued after a year of falling prices.

Local governments have also taken measures to stimulate the housing market. Xi’an, in central China, recently allowed non-native homebuyers who purchase flats larger than 90 sq m to obtain a residence permit for the city, which comes with social welfare benefits.

The price recovery matches official data showing that new residential property sales were up 13 per cent annually in floor-area terms in May, the second month of gains after 13 straight months of falling sales.

The central bank’s first-quarter household survey showed that 14.7 per cent of residents said they planned to buy a home in the next three months, up from 13.8 per cent in the previous quarter.