China Home Prices Accelerate Rise in May

The Reuters headline below is what I've been talking about here since the credit spike in January, China has very little room for stimulus if they aren't willing to risk another expansion of the housing market. The flip side is there's little evidence China can grow credit and the economy without the housing market, government/SOE infrastructure and industries with overcapacity such as steel. Rising home prices, new highs in steel production and easing of debt limits on local governments points to China relying on its old development strategy.

Reuters: China's home prices growth fastest in five months, raises policy challenge

Average new home prices in China’s 70 major cities rose 0.7% in May from the previous month, picking up from a 0.6% rise in April and the quickest pace since December, according to Reuters calculations based on National Bureau of Statistics (NBS) data on Tuesday.

That marked the 49th straight month of price gains. Sixty-seven of the total 70 cities surveyed by the NBS reported higher prices in May, the same as April.

On an annual basis, home prices increased 10.7% in May, unchanged from April’s growth rate.

Beijing has repeatedly urged local governments to keep runaway prices under control, but a recent easing in credit conditions, pent-up demand for housing, and an implicit government mandate to prevent a collapse have kept the market surprisingly resilient.

But further curbs on home buyers would risk adding to pressure on China’s economy, which has seen sales slowing due to weaker domestic demand and an escalating trade war with the United States.

CN Stock: 房市到底是冷还是热？涨幅虽有收窄，但三四线城市依然火爆
Sogou: Is the housing market cold or hot? Although the increase has narrowed, the third-and fourth-tier cities are still booming.http://translate.sogoucdn.com/pcvtsnapshot?from=auto&to=zh-CHS&tfr=translatepc&url=http%3A%2F%2Fnews.cnstock.com%2Fnews%2Cbwkx-201906-4389547.htm&domainType=sogou

Judging from the changes in sales prices of commercial housing in 70 large and medium-sized cities released by the Bureau of Statistics, in May, the number of cities with rising prices of new houses was 67, and the number of cities with rising prices of second-hand houses was 55, all the same as in April.

Judging from the index, the price increase of both new and second-hand houses is slowing down. Taking the second-hand housing that can better reflect the real situation of the market as an example, it is estimated that the price of the second-hand housing in 70 large and medium-sized cities rose 0.43% month on month in May, 0.1 percentage point lower than that in April.

Wang Ruochen, a researcher at the Yi Ju Real Estate Research Institute, told reporters in the Shanghai Stock Exchange newspaper that the rise in house prices in 70 cities in May narrowed month on month, meaning that the popularity of the spring has begun to decrease. With the tightening of real estate policies in hot cities, the rise is expected to continue to narrow in the coming months.

Zhang Dawei, an analyst with Centaline Real Estate, said that the market showed that the Indian summer had subsided in May, and the market decline was mainly due to the intensive release of a series of continuously tightening regulatory policies. In addition, after the rise of house prices in some regions, the availability of houses with high cost performance has decreased, affecting the enthusiasm of home buyers.

According to incomplete statistics, ministries and local governments implemented a total of 41 regulatory measures on real estate in May, slightly less than 60 in April, but the intensive release for two consecutive months shows that the trend of tightening regulatory policies will continue.

As I reiterate in all these stories, credit drives prices. Controls will work if credit growth stays in a very modest downtrend in June. If real estate cools though, something else has to drive growth.