New dwelling price increases for December in China
GUEST OBSERVER
December saw a continuation of the recent trend of softer price growth in tier-1 cities and sustained price gains for tier-2 and 3.
Of the 70 cities reporting, 46 responded that the price of new dwellings had increased in the month; similarly, 45 cities also saw monthly gains in the secondary market.
While down from their respective peaks of 65 (April 2016) and 60 (September 2016), price growth for new and existing dwellings clearly remains robust and broad based. There has been an increase in the number of cities reporting price declines for new builds, but these remain well below the level seen in 2015.
Over the year, price growth in tier-1 cities remains strong despite having moderated since April. For new builds, prices are currently up 24.9 percent/yr. Price growth in the existing market is a little stronger at 28.8 percent/yr.
As we have outlined on a number of occasions, much of the deceleration in annual price growth in tier-1 cities has come as a result of a material slowdown in Shenzhen, from 62.5 percent/yr in April to 23.5 percent/yr currently (for new homes).
In effect, Shenzhen has come back to the pack, with Beijing and Guangzhou seeing sustained annual growth circa 22 percent/yr over that time and Shanghai having slowed from 32.9 percent/yr (September 2016) to 26.4 percent/yr.
Price growth in tier-2 and tier-3 cities was also very healthy in December, respectively at 12.0 percent/yr and 8.8 percent/yr for new builds. The outcomes for existing dwellings were similar albeit a little softer, at 9.6 percent/yr and 5.7 percent/yr.
Authorities will be pleased that momentum has broadened outside of tier-1 in a sustained manner. Looking ahead, additional demand for domestic property is likely to build as a result of households being unable to (legally) invest abroad.
Currently the construction and investment data is only available to November. Till then it is apparent that the inventory of unsold homes and current construction projects continued to be worked through. However, we are yet to see new project starts respond.
If confidence in the housing market and the broader economy is sustained, then a (likely modest) pick-up in starts is only a matter of time.
Elliot Clarke is senior economist, Westpac and can be contacted here.