China's red-hot property market starts cooling amid slowing economy

Photo: CNN

The decline in second-hand house price in China has spilled over to more cities from first-tier cities of Beijing and Shanghai, adding to evidence that the once red-hot property market is cooling, according to the latest official statistics.

The National Bureau of Statistics reported that 22 of 70 monitored major cities witnessed a month-on-month price drop in December, up from 17 in November.

The average price of second-hand houses in the four first-tier Chinese cities of Beijing, Shanghai, Guangzhou, and Shenzhen dropped 0.3 percent month-on-month, while those in the remaining 66 cities were growing at a slower pace than they did in November, the figures revealed.

This trend, which is also prevailing in the new house market, could prompt Chinese policymakers to loosen their grip on the property market.

The central government started to impose administrative curbs on housing purchases and land used for residential developments in the autumn of 2016 after a surge in prices raised concerns about a property bubble.

Cities that saw crazy speculative investments in the real estate industry, such as Beijing, Shanghai, and Xiamen in Southeast China’s Fujian Province, announced a package of restrictions including price caps and house purchasing qualification.

With slowing economy, the central government has softened its tone on streamlining the property market, a key pillar of China’s national economy.

It is estimated that the real estate industry makes up about one fifth of China’s economic outputs.

Some cities, including Heze in East China’s Shandong Province, and Guangzhou and Zhuhai in South China’s Guangdong Province, have already started rolling back some curbs on house purchasing.

Banks have also started to lower mortgage interest rates in some cities to entice homebuyers.

Red-hot property market

China’s property market, particularly in the urban areas, has witnessed a boom over the past two decades.

In Beijing, homes that went for an average of around 4,000 yuan (US$580) per square meter in 2003 are now above 60,000 yuan ($US8,600) per square meter.

This makes investment in the real estate industry one of the quickest ways to get wealth.

As housing prices rise, homebuyers clamor to purchase property before the next price increase.

At the opening of a once-every-five-years leadership confab in 2017, Chinese President Xi Jinping said that “housing is for living in, not for speculation.”

Xi’s remarks have been one of the guidelines for regulators to streamline the red-hot property market in the following months.

Since the ninth month of last year, property developers started to sell homes at discounts amid falling turnovers, causing those who have bought homes to protest across the country.

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