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UPDATE 2-China property investment growth slows in 2011
January 17, 2012 / 6:50 AM / 6 years ago

UPDATE 2-China property investment growth slows in 2011

* China Dec real estate investment up 12.3 pct on yr
    * Property sales revenues down 1.3 pct in Dec from yr ago

    By Langi Chiang and Koh Gui Qing	
    BEIJING, Jan 17 (Reuters) - Annual growth in real
estate investment in China, a main driver of the economy, slowed
in December to its lowest pace in a year, falling in tandem with
property sales revenues, but analysts predict the worst is yet
to come.	
    Property investment grew 12.3 percent from the same month a
year earlier, down from an annual rise of 20.2 percent in
November and 25.0 percent in October and September, according to
Reuters calculations based on official data released on Tuesday.	
    Analysts said growth would moderate further in coming months
before a possible revival in the latter half of the year,
depending on how fast China relaxes its monetary policy to
safeguard growth and how much developers cut prices.	
    "Given the sustained property tightening stance and fine
tuning of monetary conditions, Chinese real estate investment
growth will slow further to around 13 percent in 2012," said Shi
Qi, an analyst with CEBM in Shanghai.	
    Real estate investment grew 27.9 percent in 2011 from a year
earlier to 6.2 trillion yuan ($977 billion), 13 percent of
China's gross domestic product, the National Bureau of
Statistics said.	
    It increased 33.2 percent in 2010.	
    The cooling real estate market helped curb annual growth in
the world's second-largest economy to 8.9 percent in the last
quarter of 2011, its weakest pace in 2-1/2 years, according to
other data released on Tuesday. 	
    Property sales rose 12.1 percent in 2011 compared with a
year earlier, translating into a year-on-year drop of 1.3
percent in December alone, the third straight month of decline.	
    The month-alone data, derived from cumulative figures, could
be volatile.	
    Evergrande Real Estate Group Ltd, the
second-biggest developer in China by sales value, on Monday
forecast flat 2012 sales and said the wider property market
would be gloomy in the first quarter, with no improvement until
after the Lunar New Year in late January. 	
    The developer and many of its peers reported sharp
double-digit annual drops in sales in December as the mainland
Chinese property market felt the pinch from the central
government's efforts to lower home prices and restrict property
    However, Ma Jiantang, the NBS chief, downplayed investors'
worries about a hard landing in the real estate market and the
risks to the banking system and broader economy.	
    "Major indicators for the property sector are still on the
rise despite a slowdown in growth," he told a news conference.
"They are still positive drivers for Chinese economy."    	
    He added the easing numbers showed that China's existing
measures to curb property speculation and housing inflation have
been effective.	
    Average home prices in China have been falling since
October. The NBS is scheduled to release December data on
    Analysts expect Chinese real estate investment to fall below
10 percent in the first few months of 2012, as China's top
leadership has reiterated once and again that it would stick to
a tightening campaign against the once-bubbly real estate market
in 2012.	
    Property shares in Shanghai, which fell nearly 18
percent in 2011, rose 4 percent on Tuesday, outperforming the
gain in the benchmark Shanghai stock index, on hope of a
policy relaxation.	
    Property construction activities shrank in December, showing
that developers are slowing their pace of expansion amid 
pessimistic views for 2012. Many developers, including
Evergrande and Agile, have halted land purchases.	
    Newly-started property construction fell 19.1 percent in
December from a year earlier, its first decline since November
    Property projects under construction dropped 21.5 percent,
compared with a year-on-year rise of 14 percent in November.	
    Developers' slowing activities will probably lead to a short
supply of homes in 2013 and a rebound in prices.	
    "Falling new construction means limited supply in months
later and will probably reverse the supply-demand relation in
2013," Ren Zhiqiang, chairman of Huayuan Property, said earlier
this month. 	
    Worrying about their high exposure to the property sector
and under the instructions from top leaders, Chinese banks have
been cutting their loans to developers and home buyers. The NBS
data showed mortgage loans fell 12.2 percent in 2011. 	
    Under such a backdrop, Chinese developers will probably have
to cut prices further in 2012, grasping their only opportunity
when Beijing relaxes monetary policies to spur first-time home
purchases in part to protect economic growth.	
    A Reuters poll last week showed that analysts expect average
home prices in China to fall between 10 and 20 percent this
year, with the biggest declines in major cities such as Beijing
as well as highly speculative markets of Ordos and Wenzhou.

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