Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

China property investment growth slows, sales dip on increased curbs

Published 05/15/2018, 02:17 AM
Updated 05/15/2018, 02:17 AM
© Reuters. FILE PHOTO: Residential apartments are located in downtown Shenzhen

© Reuters. FILE PHOTO: Residential apartments are located in downtown Shenzhen

By Kevin Yao and Yawen Chen

BEIJING (Reuters) - China's property investment growth slowed in April while sales marked their biggest fall in six months as higher borrowing costs and increased curbs on buyers weighed on demand, backing views that a key driver of the economy is losing some momentum.

Real estate investment rose 10.2 percent in April from the same period a year earlier, compared with a 10.8 percent rise in March, according to Reuters calculation based on National Bureau of Statistics data. The figure mainly focuses on residential real estate but also includes commercial and office space.

Property directly affects 40 other business sectors in China and is a major driver for the economy but a furious market boom since 2016 has raised concerns and prompted a flurry of government measures to tame soaring home prices.

"Real estate developers are launching fewer new projects in the face of weak sales growth, which has taken a hit recently due to slower mortgage lending and tighter property controls," Capital Economics Senior China Economist Julian Evans-Pritchard wrote in a note after the data.

Property sales by floor area fell 4.1 percent in April on-year, the weakest monthly performance since October 2017 and a turnaround from a 3.2 percent gain in March.

In the first four months of the year, investment grew 10.3 percent from a year earlier, slowing slightly from the first quarter when growth hit 10.4 percent, its fastest in three years. The first quarter growth was driven by surging land prices and a boom in demand from smaller cities where home purchase conditions are less restrictive.

Some major cities such as Shanghai and Hangzhou have seen a surge in the marketing of new home developments over the past two months as authorities reduced curbs, with developers also eager to ramp up the launches to boost their cashflow.

However, growth is expected to cool with a government crackdown on risky borrowing triggering worries about future financing, indicating growing liquidity pressure facing Chinese property developers.

New construction starts measured by floor area, an indicator of developers' confidence, were up only 2.9 percent in April from a year earlier, slowing from a sharp jump of 17.8 percent in March, Reuters calculations showed.

In year-to-date terms, property sales rose just 1.3 percent in the first four months, the smallest increase of any January-April period since 2015.

New household loans, mostly mortgages, slowed to 528.4 billion yuan in April from 580 billion yuan in March, according to central bank data released last week.

While demand appears to be softening, a government think tank said on Monday that the property market remains frothy and is still subject to volatility.

China's new home prices rose for their 35th consecutive month in March, with more cities reporting growth as the government supported demand from first-time buyers. The April figures are due on Wednesday.

Zhang Yiping, an analyst with China Merchants Securities said property investment's overall contribution to the real economy has fallen significantly with indicators of market strength - sales and new construction - both dipping.

However, despite the signs of cooling, the pace of growth remains robust.

"The still rapid growth in real estate investment is still mainly thanks to higher land purchases," Zhang said.

Land purchases totaled 24 million yuan during the period, up 13.6 percent from the year earlier, NBS data showed.

© Reuters. FILE PHOTO: Residential apartments are located in downtown Shenzhen

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.