October 24, 2014 / 2:16 AM / 5 years ago

Chinese home prices fall for fifth month in September, year's gains lost

BEIJING/HONG KONG (Reuters) - Chinese home prices fell for a fifth straight month in September, wiping out gains scored in the past year and raising expectations the government will have to implement more economic support measures to cushion the blow.

The monthly falls left average home prices in 70 major Chinese cities down 1.3 percent in September from a year earlier, the first such drop since November 2012.

New home prices fell month-on-month in a record 69 of the 70 major cities, up from 68 in August. Only the southern city of Xiamen saw stable prices last month, National Bureau of Statistics (NBS) data showed.

The worst performance was in the eastern city of Hangzhou, where prices sagged 7.6 percent in September from a year before.

The decelerating property market, which accounts for about 15 percent of China’s economy, has crimped demand in 40 sectors ranging from steel to cement and furniture.

“The property downturn is still the main drag on the economy,” Wang Tao, an economist at UBS in Hong Kong, said in a note.

“The negative impact of the ongoing property downturn is being felt not only in heavy industry, but also in manufacturing investment.”

The slowdown in the housing market followed GDP data showing the economy grew at its slowest rate since the 2008/2009 global financial crisis in the September quarter, adding to worries that it will drag on global growth.

Yu Bin, a senior economist at the Development Research Center (DRC), the cabinet’s think tank, said on Friday it expected China’s economy would grow by 7.4 percent this year, slightly below the government’s target of 7.5 percent. That would be the slowest pace in 24 years.

Chinese officials have indicated they would be willing to tolerate slightly slower growth as long as the job market continued to hold up, so there was some relief in the form of steady unemployment data on Friday. China’s urban registered unemployment rate was 4.07 percent at the end of September, down slightly from 4.08 percent at the end of the second quarter, the labor ministry said.

A government spokesman said the 10.82 million new jobs added so far this year had already exceeded the full-year target of 10 million, mainly due to a strong service sector.


In late September, China cut mortgage rates and downpayment levels for some home buyers for the first time since the 2008/09 global financial crisis, its boldest step yet to energize an economy increasingly threatened by a sagging housing market.

Although transaction data from private real estate consultancies pointed to a pick-up in sales in recent weeks, the impact of new government measures to provide cheaper loans to second-home buyers remains uncertain.

“It still takes time to see whether a recovery of home sales will affect home prices,” Liu Jianwei, a senior statistician at the National Bureau of Statistics (NBS), said in a statement accompanying the data.

Analysts concurred it was too early to tell if government moves in late September to lower mortgage rates and down payment requirements would be enough to stem the price slide.

And even if prices do stabilize, developers will remain reluctant to start new projects until a glut of unsold homes is worked off, depressing demand for raw materials and keeping pressure on labor markets.

“You can’t expect to feel the impact of policy measures right away. Liquidity is increasing and the real estate sector is driven by liquidity so prices will gradually improve,” said a Shenzhen-based developer.

The number of potential buyers and sellers of properties increased significantly in October, but the negotiation process has also grown more demanding as sellers become more confident in the market outlook, a real estate agent in Shanghai said.

Meanwhile, Chinese developers are turning to offbeat marketing gimmicks and give-aways as they battle to shift their massive inventory, including resort stays for buyers.

Additional reporting By Judy Hua and Kevin Yao; Editing by Eric Meijer

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