October 2018 NBS Price Data in Leading Chinese Cities

China’s National Bureau of Statistics (NBS) released its monthly report on home sale prices (LINK).  The segregation of “15 Hot Cities” in the NBS report implies that they will be the primary focus of government policy:

China HPR Markets Oct 2018 NBS

Intense market restrictions kept prices flat for many months in these key markets, but the average has recently been boosted  by a clear rebound in some of the Tier 2 cities (e.g. Zhengzhou, Jinan, Chengdu, and Wuhan).

China HPR Markets Oct 2018 NBS Average Change

Segregating the 10 strongest and weakest of the 70 markets covered by NBS data shows that most of the cities with the strongest recent prices include former laggards in regions with weaker economies and stagnant population, but gentler application of housing market policies.  The weakest prices have been in the largest and formerly hottest markets, particularly in the Yangtze River Delta area.  Those cities have strong economies, growing populations, and cultural appeal that should sustain long-term housing demand.

Chin NBS Top Bottom Oct 2018

Strong economic conditions in 2017 and early 2018 gave the government an opportunity to restrict unhealthy real estate speculation and excessive leverage.  A recent softening in the economy and uncertainty resulting from trade tensions have led to a clear shift towards fiscal and monetary easing that seems to have been accompanied in some cities by a relaxation of housing regulations without any formal announcements.  Detailed perspective on conditions in different cities is available in this recent CRIC commentary

NBS data showed that commercial real estate sales volume in October 2018 fell 3.1% by area and rose 6.3% by value compared to October 2017.  Consumer sentiment about the economic outlook is cautious and homebuyers took a “wait and see” approach.  Developers responded with promotional activities that gave the impression of rampant discounting without actually lowering prices on a broad scale.  Many larger and listed companies that report monthly contract sales value showed strong performance in October (table compiled by China Merchants Securities)

Contract Sales cms October 2018

The Chinese government has been introducing a broad range of supportive policies to ease financial conditions, increase public confidence, and boost consumers spending.  These measures should improve homebuyer sentiment, but broad easing of housing regulations is unlikely and also appears unnecessary at this time.

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