China’s National Bureau of Statistics (NBS) released its monthly report on home sale prices (LINK). The prior segregation of “15 Hot Cities” in the NBS report has been removed and suggests that price restraints have diminished in importance as a policy goal. It is still useful to monitor trends in these major markets.
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) and emerging strength in top markets (Beijing, Hangzhou, and Guangzhou). It’s possible that some of the reported price increase could reflect sales mix as cities may have relaxed registrations of high priced sales.
Segregating the 10 strongest and weakest of the 70 markets covered by NBS data shows a couple of “Hot Cities” (Xi’an and Jinan) on the gainers list along with policy beneficiaries (Haikou and Dandong) and former laggards (Hohhot etc…) The weakest prices have been in large and formerly hot 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.
Strong economic conditions in 2017 and early 2018 gave the government an opportunity to restrict unhealthy real estate speculation and excessive leverage. Recent softening in the economy and uncertainty resulting from trade tensions have led to a clear shift towards fiscal and monetary easing that has been accompanied in some cities by a relaxation of housing regulations. Analysts expect relatively stronger conditions in leading cities in 2019 and softer conditions in smaller cities (Tier 3&4 markets). CRIC provided commentary on the market outlook here and on the likelihood of housing policy relaxation in different cities here. They see changes as most likely in cities with above average inventory and where the government budget is heavily dependent on revenues from property sales.