Prices of new homes in 36 of China’s largest cities rose by an average of 2.07% month-on-month, 5.28 percentage points less than December’s figure, the National Development and Reform Commission said. The latest data suggest Beijing’s incremental tightening of the property market is beginning to take effect.
After spiraling housing prices amid low supply and high liquidity raised concerns about asset price bubbles, the government responded by ordering banks to slow lending and gradually reinstating pre-downturn mortgage discount rates and lending criteria on second- and third-home purchases. Beijing wants to take the steam out of the property market, but not cripple it by bringing about the month-on-month contractions in new home prices experienced over a year ago. Striking a policy balance that delivers sustainable growth will be one of the government’s main focuses this year.
While sales prices and volumes will be more volatile in tier-one cities where there is a greater amount of speculation, end-user demand is still strong, particularly in second- and third-tier cities. A nationwide correction in new home prices is unlikely but price growth will continue to slide.