China's house prices drop for first time since curbs
Chinese home prices fell in March from a year ago, the first annual drop since the government launched measures two years ago aimed at cooling the sizzling property sector.
While Beijing's policy moves have started to show results, officials warned that property inflation could revive even as some economists fretted that a deflationary trend could discourage investment, posing downward risks for the world's No.2 economy.
Average new home prices across China fell 0.7 per cent last month from March 2011. They dropped 0.3 per cent from February, marking the sixth consecutive month-on-month decline, according to Reuters calculations using data published by the National Bureau of Statistics.
The NBS data also showed new home prices fell in March from a month earlier in 46 of the 70 major cities it monitors, and declined in 37 cities in year-on-year terms.
"This is further evidence of China's property macro control measures," said Ma Xiaoming, the NBS' senior statistician in a statement published alongside the data today.
The drop was mainly because more developers resorted to price cuts to boost sales, Ma said, noting that some commercial banks lowered mortgage rates for people buying their first homes, spurring demand.
Weak sales and record inventories of unsold homes as well as worsening balance sheets have pushed developers to deepen price cuts while slowing down the pace of new construction.
The trend will be welcomed by Premier Wen Jiabao's government which launched moves to curb property speculation and rein in house inflation two years ago. The outoing premier has vowed not to let up on containing the housing market in the remaining months of his tenure until early next year.
The NBS's Ma said: "The upward pressure in home prices still exists and the property tightening is at a critical phase."
Sustained efforts to contain the housing market will hold back a recovery in a cooling Chinese economy, with real estate investment accounting for 13 per cent of gross domestic product in 2011 and affecting around 40 other industries.
China's annual economic growth slowed in the first quarter to the lowest pace since the 2008-09 global financial crisis. But the growth of 8.1 per cent was still above the government's target of 7.5 per cent for 2012.
Property investment grew 19.6 per cent in March, slowing from an annual rise of 27.8 per cent in the first two months.
Reflecting a slowdown in the real estate market and weak external demand, the World Bank cut its forecast for China's 2012 economic growth to 8.2 per cent and predicted that a rebound might not begin before the third quarter.
The investment and price data raised concerns among some economists and investors.
"I'm worried about negative annual growth in both property sales and construction in March - the government should start fine-tuning policies," said Jianguang Shen, chief China economist at Mizuho in Hong Kong.
"The ultimate goal of the property tightening is to drive down prices but maintain growth in construction and investment," he said.