Chinese real estate sales hit by government curbs

April 26, 2017

by: FT Confidential Research

The FTCR China Real Estate Index fell back to a three-month low in April as sales slowed sharply following government measures to cool speculative activity.

After a torrid post-lunar new year period, the ratcheting up of administrative curbs on buyers and sellers appeared to bite in April, with a number of developers reporting shrinking interest from buyers looking for a second home. The slowdown was most noticeable in first-tier cities, which have been the main target of the government’s tightening campaign, where price inflation also cooled sharply. Our April data nonetheless suggest house prices have now risen for two straight years across city tiers and that expectations for continuing price rises will underpin demand.

• Developers reported that home sales fell for the first month since January.
• Our Home Sales Index fell 18.9 points month on month to 46.2. In April 2016, the index stood at 56.9.
• Only 11.8 per cent of developers said those looking to buy a second home were the biggest source of demand, the second-smallest proportion for this group in the survey’s history. Owner-occupiers were again the main source of demand (49.5 per cent).
• The volume of sales inquiries rose at a slower pace than March’s six-month high, with our index dropping to 55.6 from 71.4. Developers in first-tier cities reported that inquiries fell outright for the first time since January.

• House price inflation cooled from March but remained elevated, increasing at the second fastest pace in the past six months.
• The FTCR China Home Price Index fell to 63.9 from 67.4 in March.
• 58 per cent of developers offered a discount to the list price in April.

• Supply of new houses to the market increased for the second straight month, although at a slower pace.
• Our New Home Supply Index fell six points to 50.8.
• The share of developers reporting sales volume increases continued to outstrip that reporting supply growth: 30.5 per cent said transactions rose while just 25.6 per cent said supply did.

• Despite signs of a cooling market, developers maintained a positive outlook for sales volumes in the coming month, while prices are also expected to continue rising.
• Our Home Sales Outlook Index fell 4.6 points to 54.4, while our Home Price Outlook Index fell 3.1 points to 62.8.

• Developers reported that access to discounted mortgages for first-time buyers tightened in April for a third straight month: 41.1 per cent said this group could access loans below the benchmark interest rate, down from 43.2 per cent in March.
• Mortgage discount availability eased for first-time buyers in third-tier markets but tightened for those in first and second-tier cities. Just 32.1 per cent of respondents in second-tier cities were able to take advantage of discounted mortgage rates in April, the smallest proportion since February 2016.
• Mortgage discount availability increased slightly for second-home buyers, with 9.9 per cent of developers reporting such discounts, up from 7.6 per cent in March and 7.4 per cent in April last year. 

• Sales volumes fell across all three city tiers but most sharply in first-tier cities. Our Home Sales Index for first-tier cities fell 25.9 points month on month to 41.1.
• Price indices pointed to rising house prices across city tiers in April, as they have for two years, although price inflation cooled sharply in first-tier cities. The first-tier city price sub-index fell 11.3 points month on month to 58.9, while those for second and third-tier cities dropped just 0.9 points and 4.3 points respectively.

The FTCR China Real Estate survey is based on interviews with 300 developers in 40 cities. For further details click here. This report contains the headline figures from the latest Real Estate survey; the full results are available from our Database.

FT Confidential Research is an independent research service from the Financial Times, providing in-depth analysis of and statistical insight into China and Southeast Asia. Our team of researchers in these key markets combine findings from our proprietary surveys with on-the-ground research to provide predictive analysis for investors.