Credit Burst Tapers, Housing Market Starts Cooling

The January credit burst fueled a nascent housing bubble strong enough for the government to restart stringent housing controls. Those policies may "work" thanks to no follow on credit growth, with some signs the market is already cooling.

iFeng: 5月楼市“小阳春”结束 国人找房整体降温
Sogou: In May, the "Spring" of the real estate market ended, and the overall cooling of Chinese people's search for housing began
Third-and fourth-tier cities step out of the "excessive rise" range

Looking at different cities, according to the latest data from the Shell Research Institute, in May, first-tier cities existing home sales volume continued to decline, but the decline narrowed and the "steady state" was obvious.

Take Beijing for example. In May, Beijing Chain Store existing home Real-time transactions declined slightly by about 8% from the previous month. Under the constraint of high down payment ratio, the pace of release that just needs improvement is still slow. In addition, the feedback from the market to the owners is not positive. The downward quotation of the owners is the absolute mainstream. In the price adjustment in May, the price increase accounted for only 14%, down 4% from the previous month.
The primary cooldown signal at the end of May is falling interest in homebuying:
The nationwide housing search fever has cooled down as a whole.

According to statistics from anjouke real estate research institute, in may, the search for new houses in the whole country fell 2.4% month on month, the search for new houses in first-tier cities rose 0.5% month on month, the search for new houses in second-tier cities fell by 4.1%, and the overall search for new houses in the whole country dropped.

In addition, the home buyers' confidence index and broker's confidence index showed a downward trend in May. 67% of the interviewees among home buyers believe that the house prices in the first and second tier cities will maintain a stable trend in the short term, and there is still room for increase in the future.

"May is the first month since 2019 when the confidence index of users and brokers shows a double drop. The drop in the confidence index of users is obviously greater than that of brokers." 58 Zhang Bo, chief analyst of Anjuke Real Estate Research Institute, said on the one hand, the change in user confidence can be seen from the cooling of the market itself, which also proves that there will be no pattern of continuous rise in unilateral market heat in 2019. Overall stability and small fluctuations should be the mainstream trend.

Zhang Bo said, on the other hand, under the big background of city-based policies, the "micro-tightening" policy introduced in May in Suzhou, Hangzhou, Hefei and other hot second-tier cities also poured some cold water on the market, providing timely and effective "precautionary measures" against various signs that may affect the stability of the real estate industry, and the effect was immediate.
The past two Junes saw M2 increase 1.85 percent and 1.56 percent. Credit growth has been elevated in 2019 because of January and also to a much lesser degree March. June credit growth data will be announced around the time Suzhou (the early hot market of this cycle) must tighten policy if prices don't stabilize.

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