Home Prices Growth Slowed To Eight-month LowIt becomes more evident that China’s home prices are losing momentum in recent months, particularly in lower-tier cities where many homes have been vacant for years and sales volume have dropped by as much as 50 percent last year. China’s property market continued to cool down in March, with growth rate of new home prices in major 70 cities across the country rose an average of only 7.7 percent from the same period a year ago. It was the third consecutive month of declining growth rate and was at an eight-month-low level, compared with 8.7 percent in February and 9.6 percent in January.

On a monthly basis, new home prices rose 0.2 percent in March, compared with 0.3 percent increase in February and 0.4 percent in January.

Affected by weakening demand and high vacancy, home prices in lower-tier cities remained sluggish in March. While only one city, Wenzhou, remained in the negative territory with its new home prices falling 4.2 percent on a year-on-year basis, four lower-tier cities (including Wenzhou) reported declines on a monthly basis. Other three cities were Haikou, Yichang and Shaoguan. 10 cities, on the other hand, saw new home prices unchanged from the previous month, compared with 9 cities in February.

Even the wealthiest first-tier cities were not exempt from the country-wide home price correction. New home prices in Beijing rose 0.5 percent from February, Shanghai and Guangzhou rose 0.4 percent, and Shenzhen rose 0.2 percent. However, compared with the same period a year ago, the growth rate in Beijing eased from 15.5 percent to 13 percent, Shanghai eased from 18.7 percent to 15.5 percent, and both Guangzhou and Shenzhen slid from 15.9 percent to about 13 percent.

Other than home sales and home prices, other data announced in April also marked a deceleration or contraction in property investment and construction activity. According to the National Bureau of Statistics, total property investment in the first quarter rose 16.8 percent, the weakest growth rate since 2009, and the floor space of new property construction dropped 25.2 percent year-on-year.

Falling investment and construction were partly attributed to the Government’s tightened credit controls. Major banks have been cautious about extending additional credit to real estate projects, making it harder for developers to get loans.

Under the pressure of decreased sales and slowing demand, developers are forced to cut prices in their new projects to cash out and we expect home prices will remain on a downward trend in the near future.