By Lusha Zhang and Ryan Woo
BEIJING (Reuters) – New home prices in China grew slightly faster in March after growth slowed the previous month, putting a floor on the cooling market, as Beijing rolled out stimulus to boost the economy.
The sector’s solid growth could cushion the impact of a vigorous multi-year government crackdown on debt and escalating trade tensions with the United States, although some analysts say bubble risks are rising as prices continue to climb.
Average new home prices in China’s 70 major cities rose 0.6 percent in March, quickening from a 0.5 percent gain in February, according to Reuters calculation of data released by the National Bureau of Statistics (NBS) on Tuesday.
On the whole, it logged the 47th straight month of price increases. Most of the 70 cities surveyed by the NBS reported monthly price increases for new homes, and the number climbed sharply to 65 from 57 in February.
On an annual basis, home prices rose 10.6 percent in March, the highest since April 2017, and also accelerating from a 10.4 percent gain in February.
Consumer and business confidence have slipped in recent quarters in the face of slowing economic activity and the Sino-U.S. trade dispute, as growth in the world’s second-biggest economy slumped to near three-decade lows last year.
However, pent-up demand for housing and some local governments relaxing purchase restrictions may be further fanning price gains in a market where fear of missing out is strong.
Home prices in China are expected to rise more this year than predicted just a few months ago, a recent Reuters poll showed, as the government urges banks to raise lending and lower interest rates to support the economy.
Policymakers have been walking a tight rope between loosening some existing curbs and flushing out speculators in a market that directly influences 40 other business sectors in China and is key to tempering the economic slowdown.
But critics say Beijing’s pledge to defuse property speculation might have been compromised as banks issued far more loans in March than expected, heeding the government’s call to support struggling smaller companies and shore up the economy.
Medium- to long-term new household loans, mostly mortgages, totalled 460.5 billion yuan (£52.4 billion) in March, according to Reuters calculations based on central bank data, up sharply from 222.6 billion yuan the previous month.
Tier-3 cities mainly led the firming streak in March. Home prices in those cities rose 0.7 percent from the preceding month, accelerating from 0.4 percent in February, the statistics bureau said in a statement accompanying the data.
The Chinese city of Dandong, which lies on the border with North Korea, was the top price performer in the month, with prices increasing 1.9 percent on a monthly basis.
Price growth in China’s four top-tier cities – Beijing, Shanghai, Shenzhen and Guangzhou – rose 0.2 percent from a month earlier, slowing from a 0.3 percent gain in February. While prices in tier-2 cities, which include most of the larger provincial capitals, increased 0.6 percent in March on a monthly basis, compared with a 0.7 percent gain previously.
More recently, China’s state planner announced a scheme this month to ease residency curbs in small cities, amid a renewed push to accelerate urbanisation, which many analysts say would enable more out-of-towners to buy properties in the city, boosting property demand.
Some smaller cities have also quietly loosened curbs to prop up sentiment and demand, and Beijing appears to be showing a bigger tolerance as it emphasises on a “city-based” approach that gives local governments more autonomy in policymaking.
China’s housing market had continued to regain momentum due to eased concerns about higher borrowing costs, the increase in wealth effect from the stock market rally and renewed concerns about worsening home affordability, Tommy Xie, an economist at OCBC Greater China research, said in a note prior to the data.
“Nevertheless, we still need to see more clues of global economic recovery and more progress in U.S.-China trade talks to gauge the sustainability of the recent housing market rally.”
(Reporting by Yawen Chen, Lusha Zhang and Ryan Woo; Editing by Jacqueline Wong)