China home price inflation cools to 8-month low in March

Apr 19 2014, 19:36 IST
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SummaryAnalysts said the cooling of the property market is an initial indication of stabilisation and they expected the easing trend to continue this year.

China's home price inflation slowed to an eight-month low in March, extending to a third month a loss of momentum in a property market that has been a strong spot in the world's second-largest economy.

Average new home prices in China's 70 major cities rose 7.7 percent in March from a year earlier, easing from the previous month's 8.7 percent rise, according to Reuters calculations based on data released by the National Bureau of Statistics (NBS) on Friday.

In month-on-month terms, prices rose 0.2 percent in March, slowing from February's rise of 0.3 percent.

Analysts said the cooling of the property market is an initial indication of stabilisation and they expected the easing trend to continue this year.

"Home price rises will continue to lose momentum this year as we have seen more developers start to cut prices," said Liu Yuan, a research head of property consultancy Centaline in Shanghai.

"However, we think the market will finally stabilise thanks to still strong demand and local governments' possible moves to ease restrictions on home buying," Liu said.

China's property market has lost steam since late 2013 as authorities tightened controls on speculative buying, and as banks made it harder for home buyers and small developers to get loans.

There have been other indications of weakness in the sector, such as falling investment and slowing gains in land prices, raising some concern that the sector is becoming a risk to the government's engineered slowdown of the economy.

The government has spent more than four years trying to tame record home prices on concerns that they were stoking an asset bubble, and some see the efforts bearing fruit.

"The current property market is just cooling down mildly from the red-hot situation seen in past years, which is actually quite good for the healthy development of the industry," said Chen Guoqiang, vice chairman of China Real Estate Society, a property policy research body.

But too sharp a fall in a sector that supports some 40 other industries, ranging from cement to furniture, may set off alarm bells about potential bad debt and drag further on the economy, which marked its slowest growth pace in 18 months in the first quarter.

The NBS data showed home prices increased year-on-year in 69 of the 70 cities monitored, unchanged from February. Wenzhou, a centre for private businesses, was the only city where house prices fell in March, dropping 3.9 percent from a year ago.

On a month-on-month basis, four

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