BEIJING: China‘s home prices rose 0.1 percent in August from July, to show a modest increase for a second consecutive month and signal a gentle recovery in the property market as the government seeks to spur economic growth.
Real estate, which directly impacts around 40 other business sectors in China, is a key driver in the world’s second largest economy, which is currently going through its worst slowdown in three years as growth in exports and factory output falls.
Despite the wider economy’s problems, the government has waged a campaign for two years to cool an overheated property market in order to soothe discontent among middle-class Chinese who are increasingly priced out of the urban housing market.
China’s ruling Communist Party is particularly keen to quell disquiet ahead of its once-a-decade leadership change scheduled for this autumn, a showcase event that the government would prefer to take place against a backdrop of rising prosperity and social stability.
Any signs of a recovery in home prices fuels market uncertainty over the risk that Beijing will seek to further stifle the property market through controls, including sales restrictions and an experimental tax.
“China is more likely to tighten policy, probably expanding the property tax beyond Shanghai and Chongqing in the fourth quarter to other first- and second-tier cities where home prices are rising fast,” Shi Qi, a property analyst at private research house CEBM in Shanghai, told Reuters.
August’s 1.4 percent year-on-year price fall was the sixth successive easing, according to Reuters calculations based on National Bureau of Statistics (NBS) data released on Tuesday, but the trend of month-on-month falls from October to May has halted since June.
Home prices rose month-on-month in 35 of 70 major cities monitored by the NBS in August, down from 49 in July, but that was likely due to recent moves to re-tighten property policies.
“The data showed the pace of the home price rebound is easing. That is partly because the government has stopped approvals for the sale of expensive homes or suspended the registration of highly-priced homes,” said Shi.
Home sales rose this summer partly as monetary policy easing improved access to mortgage credit and some cities made policy tweaks to boost local property markets.Chinese property shares fell 3.8 percent on Monday after the eastern city of Nanjing was reported over the weekend to have reintroduced housing price controls, rekindling the risk that other cities would follow suit.
The index nudged upwards in the wake of Tuesday’s data, having touched an intraday low down 0.6 percent in early trade.