* July home prices ease from June, third straight monthly
* Declines seen continuing in further drag on economy
* Prices still up 2.5 pct on year but slowest gain in 17
* New home prices fell in record 64 cities m/m in July
* Developer Vanke says can't be too optimistic on policy
(Adds comments from China Vanke)
By xiaoyi shao
By Xiaoyi Shao and Koh Gui Qing
BEIJING, Aug 18 China's new home prices fell in July
for a third straight month with price declines spreading to a
record number of cities including Beijing, underlining a
worsening property downturn that is increasingly dragging on the
Average home prices slipped 0.9 percent in July on a monthly
basis, data on Monday showed, as declines spread to the largest
number of cities since January 2011, when authorities started
releasing the property price data.
"We expect home prices to continue to drop in coming months
due to increasingly pessimistic market sentiment," said Yan
Yuejin, a property analyst at real estate services firm E-House
China in Shanghai.
"The possibility of further moves by the central bank to
loosen monetary policy cannot be ruled out. That would put a
floor beneath prices," Yan said.
China's once-heated housing market has slowed this year as
sales and prices turned south in their biggest pull-back in two
years, driven by the cooling economy and the government's
five-year-long campaign to keep price rises in check.
The fall in prices adds to concerns about the health of the
economy and followed news last week that property investment and
property sales cooled in July, while banks appeared more
cautious and less eager to lend.
China Vanke , the country's largest
residential developer, saw its first-half net profit rise 5.6
percent from a year ago, down sharply from a 22.3 percent annual
increase in first half of 2013.
The company told a news conference in Hong Kong on Monday
that home prices and sales volume would not rebound quickly even
though many cities had eased restrictions on home purchases.
"It took a long while for the government to suppress housing
prices in the past. We can't expect transactions to climb once
market easing takes effect," said Vanke President Yu Liang. "The
market cannot be too optimistic."
Vanke said recently that the "golden era" for China's real
estate sector is over and it may take two to four years for the
industry to correct.
Most of Vanke's properties are in the biggest cities, which
are now starting to show signs of succumbing to the national
downturn, though its emphasis on smaller, less expensive homes
may offset some of the impact.
Many would-be buyers, meanwhile, appear to be content to sit
and wait, anticipating further price declines.
"Uncertainties over the outlook of the property market have
kept potential home buyers standing on the sidelines," Liu
Jianwei, a senior statistician at the National Bureau of
Statistics (NBS), said in a statement accompanying the data.
Average new home prices in 70 major cities fell 0.9 percent
in July from the previous month, accelerating from June's 0.5
percent monthly drop, according to Reuters calculations based on
data issued by the National Bureau of Statistics on Monday.
The softness in the housing market, which accounts for more
than 15 percent of China's annual economic output and directly
impacts around 40 other business sectors, has become an
increasing drag on the broader economy.
BIGGER PRICE FALLS
The NBS data showed new home prices in July fell in 64 of
the 70 cities that were surveyed, up from 55 cities in June.
The worst month-on-month performance was in the eastern city
of Hangzhou and the southern city of Sanya, where prices sagged
2.4 percent in July.
Price declines on a monthly basis were also seen in smaller
cities, including the northern city of Shenyang, the central
city of Wuhan and the eastern city of Yangzhou, where home
prices all fell 1.7 percent.
The downward trend also spread to the country's wealthiest
cities. In Beijing, prices slipped 1 percent from June in their
first decrease in over two years, while those in Shanghai eased
for the third consecutive month but at a somewhat faster pace.
Compared to a year ago, new home prices were up 2.5 percent
in July, slipping from the previous month's 4.2 percent gain and
marking the slowest annual growth in 17 months.
Analysts believed the downturn could persist in coming
months due to high inventories and sluggish sales.
"Reports of a rising number of cities relaxing home purchase
restrictions are encouraging, though with a large inventory
overhang, they provide no hope of a quick rebound in prices,"
Prakash Sakpal, an economist at ING said in note to clients.
A growing number of local governments have eased
restrictions on property purchases in recent weeks, while
state-controlled banks have also revved up lending to the
sector, though some analysts believe banks are increasingly
reluctant to lend to some developers as the downturn persists.
At least 30 regional governments, which earn a large part
of their revenues from selling state land, have openly or
quietly relaxed home purchase restrictions this year, according
to data from private consultancies.
Even if the slowdown lasts for more than a year a market
collapse is seen as unlikely if local governments continue to
relax controls and banks keep credit ample, according to a
Reuters analysts poll last month.
While easier access to loans is seen as key to preventing a
sharp correction in the property market, a survey by Standard
Chartered indicated many developers were finding it tougher to
access funding through banks or trust loans.
Respondents said borrowing costs were rising, and most
believed banks did not appear more willing to extend loans to
first-time home buyers, despite encouragement from the central
Several domestic banks in Shanghai, including Bank of China
Ltd, China Construction Bank Corp,
Industrial and Commercial Bank of China Ltd and
Agricultural Bank of China Ltd, denied that they had
lowered interest rates on property loans, the China Securities
Journal said on Monday.
(Additional reporting by Hou Xiangming and Pete Sweeney, and
Clare Jim in HONG KONG,; Editing by Eric Meijer)