Beijing: Growth in China real estate investment slowed in the first nine months of 2014, while property sales and new construction tumbled. Real estate investment, which affects more than 40 other sectors from cement to furniture, rose 12.5 per cent in January to September from a year earlier, down from 13.2 per cent in the first eight months of the year, according to the National Bureau of Statistics.
Revenue from property sales dropped 8.9 per cent during the same period, while new construction fell 9.3 per cent. Mortgage loans fell 4.9 per cent by value in the nine months, though they did tick higher in September.
“The government has relaxed some controls recently and property sales may pick up in the fourth quarter,” said Wang Tao, an analyst at UBS in Hong Kong. “However, we may not see improvement in sectors like heavy industry and we expect the economy to continue to slow down.”
In late September, China cut mortgage rates and downpayment levels for some home buyers for the first time since the 2008-09 global crisis, making one of its biggest moves this year to boost an economy increasingly threatened by a sagging housing market. But analysts said it was too early to tell if the move will halt price declines, which have spread to a record number of Chinese cities. Developers have massive inventories of unsold homes and banks remain reluctant to extend new loans and increase their exposure to the ailing sector.
“The policies unveiled at the end of September to support real estate lending cannot lift the whole sector in the near term,” said Du Changchun, an Shanghai-based analyst at Northeast Securities.
Tightening measures
China’s fifth-largest developer, China Overseas Land & Investment Ltd, has expressed similar caution after reporting operating profit in the third quarter plummeted nearly 50 per cent from a year earlier. “Relaxation in the tightening measures toward the China property market continued but improvement in both the transaction volume and home prices has yet to be seen while the land market was relatively quiet,” it said in a statement.
Facing cashflow pressures and a tougher time getting credit, developers have been cutting prices and offering increasingly sweet promotions to entice home buyers and reduce the backlog of unsold units. They have also been cutting back on land purchases, which is crimping revenues for local governments, many of which are saddled with high levels of debt.
“Many developers are controlling their gearing by buying less land and slowing construction,” said Kim Eng Securities analyst Karen Kwan in Hong Kong. “They’re still waiting for a good time to buy, but this won’t come until there’s a change in financing signals.”
