Prices steady in China as home buying starts to wane

HONG KONG: Surging home prices on the mainland have shown signs of slowing down as buyers hesitate about entering the market in the wake of government measures to cool property speculation.

But the slower pace of price growth last month does not signal an overall correction in home valuations, property consultants said.

They believe prices will stay firm this year as developers who reaped rich rewards from sales last year are in no rush to increase sales volume by cutting prices.

Prices of new homes in 36 mainland cities rose by an average of 2.07% in January from the month before, according to National Development and Reform Commission. The increase was 5.28 percentage points less than for December.

The most expensive units sold in January went for 12,920 yuan (RM$6,435) per sq m, up just 1.15%. That growth was 13.81% less than in December, the figures show. Newly built homes cost an average of 7,417 yuan per sq m, up 2.04% from December. The growth was 6.69% less than for December.

Skyrocketing home prices in many cities have alarmed government officials and mainland lenders.

On Monday (Feb 22), the head of state-owned conglomerate China Everbright Holdings, Chen Shuang, described the property bubble in places like Sanya on Hainan island where home prices rose 30% rise in a fortnight, as "frightening".

Analysts said the slowdown in price growth last month was a response to the government's market cooling measures, such as increasing home supply, tightening lending and maintaining down payments of 40% for a second home to cool the market.

Property consultants said the latest figures accurately reflected the current trend.

"Home prices did not rise this month, they generally stayed firm. And sales plunged," said Lee Hing-yin, director of Colliers International's research & advisory department in East China.

"Developers feel no pressure to cash in after reaping strong property sales last year. They refuse to cut prices and are withholding new launches," Lee said.

In Shanghai, a small number of developers offered 5% discounts on unsold units in suburbs such as Qingpu, Lee said. "But in the downtown areas, there is no sign that prices are falling," he said.

Andy Lee, head of Centaline Property Agency's Shenzhen branch, agreed. "Prices in Shenzhen are still firm after an 80% rise in home values last year," he said.

Developers have not launched any new projects this month to avoid price cutting, while owners of second-hand homes are refusing to lower their asking price, he said.

As a result, sales have plunged. "Our Shenzhen branches brokered 100 deals per day at the market's peak in November last year," Andy Lee said. "Now it has fallen to an average of 20 deals a day." – South China Morning Post

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