The average price of housing dropped in China last month for the first time in nearly two years, as tight credit and reluctant buyers continued to put pressure on the nation’s developers.
According to data released today by the National Bureau of Statistics, average home prices in the 70 cities that the bureau tracks decreased by 0.2 percent in May compared to April, the first month on month drop since late 2012.
Compared to the same period a year earlier, average prices were up 5.6 percent, however, even that growth rate represents a drop off from April, when prices rose 6.7 percent on an annual basis. May’s slowdown in price growth marked the fifth consecutive month that the growth rate had slid on an annual basis.
Beijing, which formerly had China’s most expensive housing, still saw home prices rise 7.7 percent last month compared to the same period a year earlier, however, the growth rate dropped notably from April’s 8.9 percent annual increase in the nation’s capital. On a month to month basis, Beijing still scored an increase of 0.2 percent, according to calculations by the Wall Street Journal.
In Shenzhen, average home prices were off 0.2 percent in May compared to April.
Shanghai Housing Market Falls Sharply
While price cuts were first seen this year in China’s smaller cities even the business center of Shanghai has begun to report falling home values, according to figures released by the city’s statistics bureau this week.
Compared to April, home prices in China’s commercial capital were off by 0.3 percent. On an annual basis, Shanghai rates still climbed 9.6 percent, although that growth rate was lower than the April’s 11.5 percent jump over the same period in 2013.
The downturn in home prices seems to be driven by a sharp drop in housing sales, as potential buyers no longer feel pressure to jump in ahead of what were once seen as inevitable price increases, and many consumers wait for the opportunity to take advantage of home discounts.
The volume of housing sold during the first five months of 2014 was down 12.4 percent compared to the same period in 2013. The figure through the end of May show the sales slowdown crescendoing from the 7.4 percent drop in square metres sold through the first four months of the year, compared to the period through April of last year.
Real Estate Slump Seen Risking China Economic Growth
With the property sector being widely seen as accounting for more than 15 percent of China’s GDP, many observers are waiting to see if the government will step in with measures to rekindle demand in order to keep the economy going.
Already there have been reports of easing of housing sales restrictions in many cities, as well as what is being referred to in many places as a mini-stimulus set of measures designed to pump more liquidity into the country’s banking system.
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