China: China new home sales decline by 56 per cent during Lunar New Year holiday.
Fundamentals of property sector ‘exacerbated’, says China International Capital Corporation
Major reason for the big slump is high comparison base, says CGS-CIMB Securities analyst.
New homes sales declined by 56 per cent year on year in 17 major mainland China cities, including Shanghai and Nanjing, during the Lunar New Year holiday, in a sign that does not bode well for a sector already weighed down by a bearish outlook and concerns about a slowing economy.
According to a research note released on Tuesday by investment bank China International Capital Corporation, Beijing’s easing stance on the overall economy boosted market sentiment in the beginning of 2019, but sales data from sample cities and developers shows “the fundamentals of the property sector are actually exacerbated”.
A survey of 14 cities by Huatai Securities found that only four cities had posted growth in sales year on year during the February 4-9 period. On the other hand, Yangzhou in Jiangsu province, Fuzhou in Fujian province and Zhaoqing in Guangdong province reported declines of 80 per cent or more. The property trade association in Pizhou, a small city in Jiangsu province, urged members not to engage in a price war, after reports that some projects in the city had cut prices by 2,000 yuan (US$295) per square metre.
Raymond Cheng, head of Hong Kong and China property research at CGS-CIMB Securities, said: “A major reason for the big slump is a high comparison base. In the beginning of 2018, sales were brisk and the common outlook was that the Bull Run would continue. A year later, the outlook is the opposite – sentiment has gone south.”
Cheng once again forecast that for the whole year, China’s new home sales by volume will slump by 10 per cent. In some smaller cities, where prices have gone through a big rally, the correction could also be 10 per cent, he added.