China's Home Price Growth Slows In May

China's month-on-month home price growth remains robust in May

China's month-on-month home price growth remains robust in May

New home prices on a monthly basis raised by 56 out of 70 cities in May.

New home prices rose on a monthly basis in 56 of 70 cities tracked by the government, compared with 58 in April, the National Bureau of Statistics said on Monday.

Investors, banned from the hottest markets, are increasingly looking inland, driving up prices in more remote, smaller cities with fewer buying restrictions, leading to a surprise pick-up in May sales. Beijing and Shanghai were flat.

In the capital Beijing, the scene of the nation's tightest property restrictions, prices of new homes were unchanged from the previous month, and prices of existing homes fell by 0.9 per cent, the first decline since February 2015.

The latest round of strict regulative measures came after more than two years of policy easing, starting with relaxation of purchase restrictions in 2014 and fueled by pro-growth policies, including interest rate cuts.

Prices fell in nine cities and were unchanged in five. China's policymakers announced in December that "houses are for living in, not for speculation".

In second-tier cities, year-on-year price growth of new homes dropped for the sixth straight month in May and price growth of existing homes declined for the fourth consecutive month, the bureau's data showed.

Compared to prior year, new home prices increased 10.4 percent in May pulling back from the 10.7 percent gain in April.

Meanwhile, China's central bank has also urged banks to strengthen mortgage risk management and crack down on market irregularities such as fake divorces to skirt high down payment requirements.

A total of 29 cities witnessed a slower price rise year on year in May, said the NBS.

Xia Dan, a senior researcher at the Bank of Communications, predicted prices in previously red-hot markets like Beijing would continue their downward movement.

Given the tougher cooling measures, analysts predicted home prices will continue to cool in coming months and there will be more intensified policies due to price rises in some third-tier cities. In the pre-owned home market, 18 cities registered slower year-on-year price rises. But in the long term, limited land and environmental capacity will restrict housing supply in big cities and threaten to push prices higher, the report said.

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