Home sales fell in February, as transactions slowed during the Chinese New Year holiday period. Strong YoY growth in the 42 Chinese cities monitored by China Confidential, as well as in listed developers’ results, points to firm underlying demand once seasonal factors are discounted, however. March sales face stronger headwinds with the new real estate guidelines issued by the State Council likely to force buyers to the sidelines (Update Alert, Mar 6).
Markets have reacted negatively to the State Council’s statement on new real estate tightening policies. However, we feel that on the basis of the information released so far, this may have been an over-reaction to the measures that were proposed.
Local governments will be given greater powers to stablise home prices in their localities, according to a statement released today by the State Council. Meanwhile, the results of our proprietary real estate survey and research published by the China Real Estate Index System, highlights that the recent acceleration in the pace of home price increases was halted in February, led by lower growth rates in larger cities.
Chinese logistics companies took a break during much of February as the Chinese New Year holiday took hold.
Our survey of 300 real estate developers in 40 cities shows sales growing at a faster rate in February, with home price increases stable. Developers hold a bullish outlook for the market in March, with the majority predicting further increases in transactions.
China’s Ministry of Land and Resources is reported by China Business News, a Chinese newspaper, to have told local authorities to accelerate their land-sale plans, suggesting that in areas recording large increases in home prices, Beijing will seek to boost the supply of homes, as well as tweaking local purchasing restrictions.
Freight volumes slumped in February MoM due to the Chinese New Year holiday but on a year-on-year basis the volume of cargoes shipped across the country remained fairly stable, suggesting a continuation of the underlying strength seen in January.
China’s Ministry of Environmental Protection is poised to cap emissions in polluting industries as Beijing ramps up its policy response to public discontent over choking smog. We believe that further policies are likely to be introduced in the near-term, as these measures dovetail with other key policy aims of Xi Jinping’s new administration.
China’s outgoing Premier, Wen Jiabao, has reiterated the government’s stance on real estate, emphasising the need to closely monitor the pace of home prices rises and adjust policy accordingly, boost the supply of low-end and social housing and increase land sales. In the wake of these explicit guidelines from the central government, we believe that local authorities will continue incrementally tightening policies in their areas (Update Alert, Feb 19) using a range of locally-specific measures.
Home sales in 42 Chinese cities monitored by China Confidential fell during the Chinese New Year holiday period, but underlying demand looks to have remained strong. This has led some local authorities to restrict access to cheap credit from housing provident funds and we think that such incremental tightening measures may continue if property prices stay buoyant in coming months.
Renminbi Compass, a new research service launched by the FT, aims to act as a navigational guide through the expanding universe of renminbi asset classes. With the Chinese currency gaining ever-wider acceptance around the world and Beijing taking steps to open its capital account, we are broadening our research coverage to include not only equity funds but also all other important renminbi asset classes, such as chengtou bonds, dim sum bonds, real estate, trust products, underground banking, art, antiques and several others.