China’s National Bureau of Statistics (NBS) released its monthly report on home sale prices (LINK). The report provides less coverage and less detail than the private Fang/Soufun 100 city index whose release has been suspended. Increased government control over price data seems to be an intangible measure to cool speculation.
The NBS report still provides some insight into the impact of housing market restrictions introduced in leading Chinese cities. Continued strong demand explains why restrictions were extended in March to cover over 60 cities, but there is no official list. The segregation of “15 First-tier Cities and Hot Second-tier Cities” in the NBS report implies that they will be the primary focus of government policy:
Intense market restrictions have kept prices flat in 2017 and the 12 month price change has steadily fallen:
By September the base comparison for year-over-year changes will be high enough that the reported annual change in the 15 focus markets will be under 10% and the environment may begin to normalize. Rising purchases of land by developers (LINK) may raise the supply of homes for sale late in the year and help to balance the market in many cities.
Government policy is intended to curb speculation, financial sector risks, and misallocation of national resources. Local governments are expected to implement whatever policy restrictions are necessary to achieve zero price increase. But these policies cannot be maintained in the long run because fundamental demand remains very strong. Nominal GDP and money supply are both rising at annual rates over 10% and per capita disposable income is up over 8%.
Alarmist media reports on the deceleration of monthly real estate sales and price appreciation (e.g. WSJ: A Pillar of Chinese Growth Starts to Show Cracks) fail to recognize that the slowdown reflects successful implementation of heavyhanded policies rather than a true deterioration of Chinese economic fundamentals. If the policies curb unhealthy leverage and speculation then long-term growth potential will be enhanced.