Slowdown In China Home Price GrowthChina’s housing market remained stable in the last month of 2013, with about 168 million square meters of residential floor area sold during the month, about the same level as last year. However, thanks to the robust rally in the second half of the year and the absence of new property curbs, the full-year figure was up nearly 20 percent from 2012, reaching a record high of 1.25 billion square meters.

Fuelled by surging sales, home prices had been rising fast in 2013, but recent data suggest a contraction in home price growth. According to data from the National Bureau of Statistics released in mid-January, year-on-year growth in new home prices in 70 major cities averaged 9.9 percent in December, unchanged from a month earlier. On a monthly basis, the growth eased for the fourth straight months since August, decelerating to 0.4 percent in December, compared with 0.5 percent gain in November and 0.6 percent in October.

Shanghai continued to lead the country in home price inflation, but the pace has peaked at 21.9 percent in December, the same as previous month. Other first-tier cities also showed a slower pace of growth in December. New home prices in Beijing rose 0.6 percent month-on-month and 20.6 percent year-on-year, easing from 0.7 percent and 21.1 percent in November, respectively. In southern China, Guangzhou slowed from 20.9 percent to 20.4 percent, and Shenzhen slowed from 21 percent to 20.3 percent.

The slowing growth in new home prices showed that recent property curbs rolled out by local governments have started to cool down the market. With these property measures expected to stay in place in the near future, home prices may face further downward pressure in 2014, especially in third-and fourth-tier cities where a lot of buildings have been vacant. While the growing momentum is also expected to slow down in first-tier cities, we believe tight supply and growing population in these cities will continue to support home prices staying at current high levels.