| BEIJING, April 17
BEIJING, April 17 China's property market could
threaten Beijing's plan to manage a slowdown in growth, as
evidence mounts of a rapid cooling in what had been one of the
few strong spots in the world's second-largest economy.
So far, the economic story is going to script, with growth
of 7.4 percent in the first quarter from a year earlier. While
the slowest pace in 18 months, it was just ahead of market
expectations and seemed to soothe fears of a sharp downturn.
But marked decelerations in property investment and sales,
and a contraction in housing starts in the first quarter, point
to weakness in a sector that supports some 40 other industries,
ranging from cement to furniture, and plays an important role in
underpinning consumer confidence.
"We think weaker property activity poses a key downside risk
to GDP growth this year," Tao Wang, economist at UBS said in a
note to clients.
Home price data on Friday is expected to show a further
moderation in March after gains fell to a six-month low in
Property investment generated about 12 percent of China's
GDP in the first quarter, down from a 15 percent contribution in
2013, Reuters calculations based on official figures showed.
The sector has lost steam since late 2013 as authorities
tightened controls on speculative buying, and as banks made it
harder for home buyers and small developers to get loans.
Media have reported developers have cut home prices in the
eastern cities of Hangzhou and Changzhou and in the western city
of Chengdu, and some developers have missed loan repayments.
"We cannot continue to count on fast growth in the property
industry to bring in strong sales of furniture and big revenues
from land sales," said Lv Fengyong, a researcher at the Chinese
Academy of Social Sciences (CASS), a government think-tank.
Annual growth in property investment slowed to 16.8 percent
in the first three months of the year from 19.3 percent in the
first two months, pulling total investment in the economy down
to a level not seen since December 2002, official data show.
Newly started construction dropped 25.2 percent in the first
quarter from a year ago.
And figures from the land ministry show residential land
price gains slowed for the first time in nearly two years in the
first quarter, and are likely to slow further.
"The 20 percent annual property investment growth seen in
the previous year will not appear again," said Lv at CASS.
A Reuters poll earlier in April found the chance of a price
correction in large cities was seen as slim this year, though
some corrections could happen in small cities.
"We expect that most developers will accelerate their sales
in the next couple of months and that price-cutting looks
inevitable to mitigate the impact of rising mortgage costs,"
Alvin Wong, a property analyst at Barclays, said in a note.
Not all are bearish on property, citing the government's
urbanisation policy and the fact that most Chinese still view
property as one of the best investment options.
Further, any threat to state revenues from a slowdown could
prompt some support. Land sales are a major source of income for
local governments, which have combined public debt of some $3
trillion, equivalent to about one-third of GDP.
"Local governments are likely to loosen property controls
quietly in the next move on concerns over their much-need land
sales revenues," said Shen Lan, an economist at Standard
Chartered in Beijing.
Chen Guoqiang, vice chairman of China Real Estate Society,
said the market was, like the broader economy, simply adjusting
to a more sustainable pace after years of red-hot growth.
"Some may expect a turning point for China's property
market. I think they exaggerate the risks and are over worried,"
(Editing by John Mair)