China property to cool in 2019, weigh on economy, curbs may be eased: Reuters poll

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China property to cool in 2019, weigh on economy, curbs may be eased: Reuters poll

China’s massive property market is expected to cool further in 2019, with smaller price rises and falling home sales adding to pressure on the world’s second-largest economy, a Reuters poll showed.Smaller cities, which have seen sharper price gains this year, may face greater risks of a slump as economic activity slows and financing conditions remain tough for smaller developers.To get more property news in China, you can visit shine news official website.

China’s average residential property prices are forecast to rise 2 percent in the first half of 2019 from a year earlier, and just 0.5 percent for the full year, a survey with 16 property analysts and economists showed on Monday.

That would mark the weakest annual rise in five years in a sector that traditionally has been one of the country’s major growth drivers and store of household wealth.Analysts have downgraded their estimates since the last Reuters poll was conducted in September, when prices were expected to rise 3.3 percent in the first six months of 2019.

Housing sales are expected to fall 5 percent in 2019, the latest poll showed, with property investment slowing to 4 percent.China’s real estate market directly impacts over 40 industries and highly correlates to domestic demand from steel to washing machines.

Despite gradually slowing from its peak levels in mid-2016 as authorities sought to cool price rises, the sector has remained relatively buoyant due to strong underlying demand for housing and few alternatives for investment.

October data showed new home prices rose 8.6 percent compared with a year earlier, the fastest pace since July last year.Recent price gains have been mostly driven by smaller cities which have fewer restrictions on home buyers than megacities.That has allowed smaller centers to get rid of years of high inventories, providing a cushion for the economy as regulators moved to rein in high levels of debt.

However, market sentiment has turned more cautious since the start of the second half of this year following a surge in failed land auctions, and on signs that China’s consumers may be growing more cautious about spending.

“There will be a significant downside risk in real estate next year - it’s mainly due to more visible contractions in smaller tier-3 and tier-4 cities,” said Sun Binyi, an analyst with China Real Estate Appraisal.The biggest risks facing the sector include smaller government allotments next year for a massive slum redevelopment program, tight financing faced by property developers and a chilling effect on confidence if the Sino-U.S. trade war drags on, Sun said.

Most economists believe China’s regional and municipal governments will loosen curbs on buyers next year as their revenue from real estate shrinks and local economies slow.But that will test central policymakers’ resolve to keep debt levels and speculation under control.Fourteen out of 16 analysts polled said they expected some degree of policy loosening in the sector in the coming year, though many argued it would be exercised in discretion and the likelihood of a blanket, nation-wide lift in purchase restrictions is low.

“These tightening measures will be relaxed. As economic growth slows the government will need the housing market to support growth,” said Iris Pang, ING Bank’s Greater China economist based in Singapore.

China warns cities to cut reliance on property, developers' shares fall
China’s regional economies need to reduce their reliance on the property market for growth and instead focus on sustainable longer-term development, the Communist Party’s People’s Daily wrote on Wednesday.Hundreds of cities across China have seen upswings in their local property markets in recent years under a long-term plan by Beijing to further urbanize the country.To get more property news in China, you can visit shine news official website.

In the last few years, the process of building new homes and revamping old ones has accelerated, backed by local governments keen to boost land sales and meet red-hot property demand.The total sales of China’s top 100 real estate developers soared 35 percent last year, according to private research firm CIRC.

But Beijing is concerned that some cities, looking for rapid expansion, have grown their property markets too quickly and at the expense of new industry development, adding potential froth to real estate prices.

“All areas should focus on their own urbanization processes, develop their own pillar industries according to population mobility and resources, and form new points of growth to avoid the old road of relying on real estate to drive the economy,” the commentary quoted a professor at the Capital University of Economics and Business as saying.

The commentary, which appeared in the international edition of the People’s Daily, said a stable and healthy property market is crucial to the development of China’s changing economy.It cited an analyst as saying that a thriving property market driven by reasonable prices boosts demand for both raw materials and downstream items such as appliances and home decoration.

Average new home prices in China’s 70 major cities rose for a 43rd straight month in November. However, the rate of increase slowed amid weaker growth in the country’s smaller cities, and soft home sales and land purchases suggest a dim outlook for the sector.

The article also comes as a number of Chinese city authorities seek to ease existing curbs on their property markets, despite broader directives from Beijing to keep prices in check.Last week, the city of Hengyang rescinded an order to lift restrictions on property prices, having just introduced the easing measure a day earlier.

On Wednesday, the Hong Kong-listed shares of top developers China Vanke (2202.HK), Sunac China (1918.HK), China Evergrande (3333.HK), China Overseas Land & Investment (0688.HK) and Country Garden (2007.HK) all fell, some by as much as 6-7 percent.On the mainland, an index tracking major property firms .CSI000948 eased 0.7 percent.CRIC predicted that the property sector will enter a period of stable growth this year, with the top 100 companies’ annual sales growth rate slowing to 20-30 percent.