Housing prices in 70 major Chinese cities increased an average of 10.6 per cent year-on-year in March, the quickest gain since April 2017 and the latest indication that the world’s second-largest economy is rebounding after a difficult start to the year.
The increase — a weighted average compiled by Reuters — came a day ahead of the release of the National Bureau of Statistics’ estimate for first-quarter GDP growth.
Data released on April 12 showed that outstanding total social financing, a broad credit measure, grew 10.7 per cent in March compared with 10.1 per cent in February. It was the highest monthly credit increase since last August.
“Sales increases in first-tier cities were mainly due to improved expectations triggered by policy easing,” said Liu Yuan, head of research at Centaline Property Agency.
Proportion of China’s total economic output accounted for by property
After imposing tight restrictions on housing transactions and mortgages for the past two years, authorities have begun to relax their grip in an effort to stimulate the economy.
According to one recent central bank study, China’s property sector accounted for 12 per cent of total economic output in 2016. Other studies have estimated the sector’s contribution could be as high as 25 per cent, after taking into account ancillary industries such as building materials.
In his annual government work report to China’s rubber-stamp parliament last month, Premier Li Keqiang dropped any mention of the official mantra in 2017 and 2018 that “houses are for living in, not for speculating on”. Last week, the National Development and Reform Commission also announced plans to scrap or relax residency permits in many cities, which have previously been used to combat property speculation.
“Central authorities worried about downward pressure on the economy are allowing local governments to relax property regulations,” Mr Liu said. “Local governments also need to do so to boost fiscal revenues.”
At least 50 cities have eased the restrictions on residency permits this year to attract skilled workers as well as to support local real estate markets, according to a Centaline, a Hong Kong-based property agency.
Many banks in cities such as Shanghai, Xiamen and Qingdao are also lowering mortgage rates for first-time home buyers. Dongguan, a manufacturing hub in Guangdong province, lowered taxes on existing home transactions last month, after which March sales more than tripled compared to February.
Some analysts cautioned that the central government was still wary of stoking housing bubbles.
Bai Yanjun, research director of China Index Academy, a property research institute, said the government wanted to encourage market demand but would still emphasise overall price stability.
“Real estate investment growth is estimated to be around 8 per cent this year, which would be a very good reading,” added Ding Zuyu, co-president at online estate agent E-house.
Additional reporting by Hudson Lockett in Hong Kong