August 14, 2018 / 3:08 AM / a year ago

UPDATE 1-China's July property investment grows at fastest pace in 2-years

* July property investment +13.2 pct y/y vs +8.4 pct in June - Reuters calculation

* July sales by floor area +9.9 pct y/y vs +4.5 pct in June - Reuters calculation

* July new construction starts fastest since Oct 2014 - Reuters calculations

* Developers funding conditions improving

By Yawen Chen and Kevin Yao

BEIJING, Aug 14 (Reuters) - China’s property investment growth accelerated to its quickest pace in nearly two years in July, driven by faster transactions and stronger developer appetite for land as funding conditions improved.

Real estate investment rose 13.2 percent in July from the same period a year earlier, the fastest pace since October 2016 and higher than June’s 8.4 percent rise, according to Reuters calculation based on National Bureau of Statistics (NBS) data. It grew 10.2 percent in the first seven months of the year.

The investment data mainly focuses on the residential sector but also includes commercial and office space.

Robust demand in real estate has so far cushioned the impact of a multi-year government effort to tackle debt risks, cut outdated industrial capacity and rein in pollution. A strong property market could reduce the risks to China’s economic outlook from a tit-for-tat trade war with Washington, which has cast a cloud over the country’s massive export sector.

But an overheating market may also add pressure to local governments who have struggled to keep the chaotic property sector in check as home prices creep up and buyers flout investment rules.

Property sales by floor area rose 9.9 percent in July from a year earlier, more than doubling from a 4.5 percent gain in June, Reuters calculations based on NBS data showed. In year-to-date terms, property sales rose 4.2 percent in the first seven months.

Several major Chinese property developers have announced higher profit guidance, citing record sales in the first half of this year. China Evergrande Group said last week it expects first-half core profit to more than double from a year ago.

Faced with economic headwinds at home and abroad, Beijing is once again looking to stoke growth by loosening access to credit, cutting the reserve requirement ratios (RRR) for banks and promising more “proactive” fiscal policy.

China’s primary money rates have fallen in recent weeks as interbank money conditions remained extremely loose. In July, Chinese banks doled out a larger-than-expected 1.45 trillion yuan ($210.37 billion) in new yuan loans, central bank data showed.

This credit boost has sparked some concerns that additional funds would be channelled into the frothy property market.

In a sign of looser funding conditions, China’s real estate developers raised 9.3 trillion yuan ($1.35 trillion) in the first seven months, up 6.4 percent from the same period a year earlier, the NBS said. That’s a faster growth rate than the 4.6 percent increase in January-June period.

Reflecting growing confidence among them, new construction starts measured by floor area rose a robust 32.4 percent in July from a year earlier, marking its fastest pace since October 2014 and compared with a 15 percent gain in June, Reuters calculations showed.

Land purchases measured by floor area were up 11.3 percent in the first seven months from a year earlier, higher than 7.2 percent growth in January-June.

$1 = 6.8824 Chinese yuan Reporting by Yawen Chen and Kevin Yao; Additional Reporting by Lusha Zhang; Editing by Sam Holmes

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