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BEIJING: China’s real estate investment grew at a slower annual pace in the first four months of 2014, while sales continued to drop from a year ago, official data showed on Tuesday, adding to signs of cooling in the property market that is also dragging the broader economy.
Real estate investment, which affects more than 40 other sectors from cement to furniture, rose 16.4% in the January to April period from the same period last year, down from an annual rise of 16.8% in the first quarter and 19.3% in 2013.
Analysts said property investment growth would moderate further in the coming months as developers are slowing their pace of expansion amid slack sales.
“Given the weakness in sales and tight credit conditions, there are no new incentives for developers to start or quicken construction,” said Alfred Lau, property analyst at Bank of Communications International Co Ltd in Hong Kong.
The cooling real estate market helped curb annual growth in the world’s second largest economy to an 18-month low of 7.4% in the first quarter of 2014, and will likely influence whether the economy suffers a shallow or deep downturn.
Property sales dropped 6.9% in the January to April period from a year earlier in terms of floor space and fell 7.8% in terms of value, the National Bureau of Statistics (NBS) also said in a statement on its website, www.stats.gov.cn.
That compared with annual drops of 3.8% and 5.2% respectively in the first quarter.
The data also showed property construction activities shrank in April amid increased concerns of the downside risks of the property market.
Newly started property construction fell 22.1% in the first four months from a year earlier, its third decline since February.
Amid increasingly pessimistic views, developers slowed their pace of expansion while some of them started to cut prices to boost sales.
Analysts expect more developers to follow suit in the next few months as they have sped up efforts to selldown high inventories.
Some efforts have been made to support the industry.
Sources told Reuters on Tuesday that China’s central bank had asked commercial banks to quicken the pace of extending home mortgages and to set mortgage rates at reasonable levels to ensure normal home buying.
NBS data showed mortgage loans fell 3.1% in the first four months of 2014 from a year ago as banks tightened beyond the regulatory requirement.
A tighter financial environment is considered one of the reasons for the cooling property market as Chinese banks become more cautious on extending property-related loans this year on tighter liquidity.
Some Chinese cities also rolled out measures to encourage home purchases recently, in a sign that local governments are increasing efforts to safeguard the economy.
“We believe the policy environment will turn increasingly friendly and thus developers’ pricing strategy will likely be crucial to the sales performances in the housing market,” Alvin Wong, property analyst at Barclays, wrote in a note to clients. — Reuters
This article first appeared in The Edge Financial Daily, on May 16, 2014.
