2014-03-18

China Home Price Rise Slows, But Still Positive In Nearly Every City; Vanke Denies Price Cut Rumors

China Home-Price Growth Slows in Big Cities on Tight Credit
Prices in Beijing and the southern business hub of Shenzhen each rose 0.2 percent in February from a month earlier, the National Bureau of Statistics said today. That was the slowest pace since October 2012. They added 0.4 percent in Shanghai, the smallest increase since November 2012, and gained 0.5 percent in Guangzhou. Prices climbed in 57 of the 70 cities tracked by the government. That compares with 62 in January.

Here is the Chinese headline: 2月70个大中城市房价同比仅温州下跌 最高涨幅为18.7% Home prices rise in every city except Wenzhou, Biggest Rise Was 18.7%

Here are the price tables from the story. These are the 70 large and medium cities from the survey. The first column is the cities. The first data column is the price change from the prior month; there are only three cities with very slight declines. Next is a yoy comparison. All of the big cities are up big: Beijing 12%, Shanghai 15.7%, Guangzhou 15.7%, Shenzhen 15.6%, Xiamen (a hot spot for real estate of late) 15%. Only Wenzhou is down, a drop of about 4%.

Finally, the last column compares prices to 2010. Here you can see Wenzhou is down 20%. Guangzhou is up almost 30%, while Ningbo, where the latest developer bankruptcy is underway, has seen flat prices.

The second table is for commercial properties, both residential and office space, while the third table shows data for existing homes, which are the weakest of the three.

As with the China credit story in general, the takeaway is that the marginal borrower requires a large amount of growth to repay their loans. Many people assume that if China's GDP growth is 4%, if credit growth is still positive, that there isn't a problem. This is not the case due to the Ponzi/speculative finance that requires ever higher growth rates to sustain the bubble. Developers will go bust in many cities if the price growth flat-lines (see Ningbo), and then it will turn negative as they dump properties.


Also, to give a feel of the mood: 万科回应“在京新盘降价3000销售”传闻:从未降价 Vanke Denies Prices Cuts on New Homes in Beijing

This was a top story today in the financial news. The article says the development in question (Vanke Orange) was to be 26,000 ¥/sqm six months ago, now it is 21,000 ¥/sqm and even if you add back 2,000 ¥/sqm in furnishing costs, it's still 3,000 ¥/sqm less. Vanke says they never cut prices.

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