May 18, 2014 / 2:26 AM / 4 years ago

Growth in China's new home prices cools to 11-month low

BEIJING (Reuters) - Growth in average new home prices in China slowed to a near one-year low in April, official data showed on Sunday, adding to concerns about the weakness of the property market and what policymakers can do if prices start to fall too sharply.

Average new home prices in 70 major cities rose 6.7 percent in April from a year earlier, easing from the previous month’s 7.7 percent rise, according to Reuters calculations based on data released by the National Bureau of Statistics (NBS).

The challenge for the government is to ensure a cooling in the market does not turn into a more abrupt correction that would pose risks to the banking system and weigh on the economy.

In month-on-month terms, prices rose 0.1 percent in April, slowing from March’s rise of 0.2 percent.

New home prices fell in eight of the 70 cities in April from the previous month, up from four cities in March.

“The home prices in 70 major cities were generally stable and the gains were easing,” Liu Jianwei, a senior statistician at NBS said in a statement accompanying the data.

Among 70 cities monitored by the NBS, only the eastern city of Wenzhou saw a 4.1 percent annual drop in prices in April, the data showed.

The price data followed official figures last week that showed property investment, construction activities and sales slowed across the country.

Beijing has spent more than four years trying to tame rising home prices on concerns of an asset bubble and the measures started to take hold toward the end of last year.

Existing home prices dropped month-on-month in 22 cities in April, compared with 14 in March, the NBS data showed.

Prices in the capital Beijing rose 8.9 percent in April from a year earlier, easing from March’s year-on-year increase of 10.3 percent, and marking the sixth month of slowing gains.

Shanghai’s price gains eased to 11.5 percent in April from a year ago, versus 13.1 percent annual growth in March.

Analysts believe the health of property market will be an important factor in whether the world’s second-largest economy suffers a shallow or deep downturn.

The slowdown in property market helped pull down annual economic growth to an 18-month low of 7.4 percent in the first quarter of 2014.

Facing slack sales and high inventories, property developers have slowed their activities and some have started to cut prices to boost sales. So far widespread price cuts have not been seen and the data showed home prices in most cities still rising, albeit at a slower pace.

Reporting By Xiaoyi Shao and Sui Lee Wee; Editing by Matt Driskill

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