Tiny drop in Chinese house prices in February, but further falls expected

Average house prices in the 70 largest and mid-size cities in China fell 0.099% in February following falls of 0.14% in January and 0.22% in December, according to calculations by Dow Jones Newswires.

Mark Budden, North Asia area leader at property and construction consults EC Harris, expects property prices to continue to fall in the second half of 2012 and until Chinese government policies governing the property sector are altered.

Budden expects government regulation of the property sector – introduced two years ago – to remain in place for the forseeable future as part of efforts to curb real estate speculation.

Current regulations include not allowing existing home owners to buy a second investment property.

House prices though are still fractionally (0.17%) up on the same time last year, but trending down from the 0.7% year-on-year gain in January.

The Dow Jones calculations are based on the latest monthly Chinese government’s National Bureau of Statistics report, which showed that prices of newly built homes fell in in 45 of the 70 cities from January to February, compared with declines in 48 cities from December to January.

Prices in 27 of the 70 cities were lower in February than they were a year earlier (compared with 15 in January), with marginal price falls recorded in Beijing, Shanghai, Shenzhen and Guangzhou.

House prices increased in four of the 70 cities in February, compared with none in January.

Last week Chinese Premier Wen Jiabao said the government would continue to regulate the property sector to prevent chaos in the housing sector.

“We must not slacken our efforts in regulating the housing sector. A bursting property bubble would hurt the entire economy, and the government wants “long- term steady and sound growth” in housing, he said.

Earlier this month rating agency Standard & Poor’s warned that Australian house prices could decline by more than 5% in 2012 if China's economy experiences a soft landing with GDP growth at about 8%.

But in the event of the less-likely scenario, under which China's economy slows to 5% GDP growth, Australia could be sent into recession, S&P warned.

China's hard landing likely flow-on effect of higher unemployment could trigger a sharp decline in Australian house prices of 20% or more, according to S&P, which rated the prospect of a hard landing happening at 10%. The other scenario – a medium landing – would trigger a 10% price fall, said S&P. The company said there was a 25% chance of a medium landing.



Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer


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