China property investment growth cools in October

BEIJING: China’s October property sales and new construction starts fell in October as the property market cooled from a two-year boom in the face of a tighter liquidity environment and a crackdown on riskier lending.

Real estate investment growth also cooled in October, in line with expectations, as the government looks to engineer a soft landing for the property sector amid a gradual slowdown in China’s economy.

Real estate, which directly affects 40 other business sectors in China, is a crucial driver for the economy but also poses a major risk as Beijing looks to tame soaring home prices without triggering a crash.

Property sales by floor area fell by 6% in October from a year earlier, compared with a 1.5% decline in September, according to Reuters calculations.

“(That decline) is exactly what the government is looking for,” said Jonas Short, who heads the Beijing office at investment bank Sun Hung Kai Financial.

“What’s driving a lot of the declines, particularly in sales, is mortgage rates spiking up.”

Sales by value fell by 1.7% year-on-year for the month of October, the first decline in monthly property sales value since March 2015, and compared to a 1.6% gain in September.

Data yesterday showed household loans, mostly mortgages, fell to 450 billion yuan in October from 735 billion yuan in September, Reuters calculated from central bank data, alongside reports that banks have slowed mortgage approvals.

Property investment grew 5.6% in October from a year earlier, cooling from expansion of 9.2% in September, Reuters calculated from National Bureau of Statistics out data on Tuesday. October’s growth was the slowest since July.

China’s housing market has been on a near two-year tear, giving the economy a major boost but stirring fears of a property bubble even as the authorities try to contain risks from a rapid build-up of debt.

The head of the central bank warned in October that China’s household debt was rising too quickly, and some analysts suspect a recent burst of consumer lending points to the illicit use of loans for property investment.

China’s outstanding household consumer loans surged nearly 30% by end September from a year earlier, data showed.

Taming the overheated property market has been a top priority for China’s policymakers this year as they looked to ensure social stability and reduce risks to the financial system as China shifted to focus more on high-quality growth in its economy.

Investment in the first 10 months of the year rose 7.8% from a year earlier, compared with 8.1% in Jan-Sept. The figure focuses mainly on residential real estate but also includes commercial and office space.

New construction starts measured by floor area, a telling indicator of developers’ confidence, were down 4.3% in October from a year earlier, after only rising 1.4% in September, Reuters calculations showed. The biggest previous decline was 7% in July.

Home prices in the biggest cities have softened slightly and gains in smaller cities have slowed in response to cooling measures, though there have been no hints of a crash which could destabilise the economy or stir social unrest. — Reuters

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