China’s housing market was red-hot during “Golden September”, a traditional peak season for home sales in China. Sales were strong in big cities and property developers looking to monetise their stock were releasing more flats on the market, pushing new home prices to rise further.
Home sales had been tepid after the Government introduced a series of property curbs in March, such as higher downpayment requirements, direct purchases restrictions and higher transaction taxes. None of them have been halted but the impacts have quickly worn off in just a span of few months. The release of pent-up demand spurred the market and national home sales in September rebounded strongly by nearly 40% m-o-m to over 120 million square meters.
Driven by strong sales, new home prices in 70 major cities across the country continued to rise for the ninth consecutive month, with the annual growth rate further accelerating to a three-year high of 9.1% in September, compared to August’s 8.3%. 69 of the tracked cities posted price gains in September. Wenzhou was the only city to post a drop, where home prices fell by 1.7% from last year.
Price gains in big cities were especially steep and were well-above the national average. For the first time since January 2011, all four first-tier cities saw their y-o-y growths in new home prices topped 20%. In second-tier cities, such as Tianjin and Qingdao, the price growths surged within a range of 7% to 10%. Of which, Beijing took the lead with a rise of 20.6% in September, followed by 20.4% increase in Shanghai. Southern cities Guangzhou and Shenzhen registered 20.2% and 20.1% y-o-y growths in new home prices respectively, edging up from 18.8% and 18.1% in August.
Given the imbalance between demand and supply, the stronger-than-expected economic growth, skyrocketing land prices and the strong sales in “Silver October”, we believe home prices, especially in first-tier cities, are likely to rise further in coming months. However, should the prices do continue to rise, it will inevitably add more pressure on the central Government to introduce stricter cooling measures, or at least reinforce its existing restrictions at the party’s key meeting next month.