China Housing Prices Drop for 3rd Month as Supply Continues to Build
The 70-city CBRE China National Commodity Housing Price Index (January 2006=100) continued to decline in July for the third consecutive month, dropping 1.0% to reach 160.1. Of the 70 cities surveyed, only 2 cities recorded a m-o-m price increase, 6 less than the previous month. The residential price in 4 cities remained unchanged, while 64 cities exhibited drops in their respective average prices.
The commodity housing sales volume in the 15 major cities tracked by CBRE in July increased by 9.4% and 8.7% m-o-m in terms of transaction units and transaction area, respectively. Among which, transaction units in Ningbo, Hangzhou, and Chongqing hit the high of the year 2014, up 37.1%, 24.7%, and 21.6% m-o-m, respectively. In contrast, Tianjin had a rather quiet period in July, with sales volume dropping to a 17-month low to a figure that is only half of last year’s average monthly sales volume.
The month of July brought more evidence that the downward trend in housing prices across the nation will not end anytime soon. Not only was it the third consecutive month that the average new housing price of the 70 surveyed cities declined; July was also the third consecutive month to see increases both in the magnitude of that drop and in the number of cities recording a drop in average price. The city with the largest drop in average housing price during July was Hangzhou, where the average price fell by 2.5%. In Beijing, the average housing price decreased for the first time since June of 2012.
In recent months more than 30 city governments have reacted to the market softening by making small adjustments in their policies on home purchases. The policy changes have included: easing restrictions on number of homes an individual may purchase; cancelling the requirement that buyer possess a local hukou (household registration); making the purchase approval process more lax; tax incentives and subsidies for home buyers; and increases in mortgage loan size limits.
“However, with increasing numbers of home shoppers adopting a wait-and-see attitude, the policy adjustments have yet to achieve their goal of propping up market prices. And it seems that goal is becoming more elusive, as the environment of capital cost escalation, tight credit and excess supply has already forced most developers to adapt price-cutting strategies as a way to reduce stocks and quicken turnover cycles,” said Frank Chen, Executive Director, Head of CBRE Research, China, "We expect that the pressure to destock will continue to rise across the city markets, and this represents definite downward pressure on home prices."
About the CBRE National China Housing Price Index
The CBRE China National Housing Price Index is published monthly and a useful measurement for monitoring new home prices in China. The Index is a weighted average of housing prices in 70 large and mid-sized China cities. Data on which the Index is based is published each month by the National Bureau of Statistics. The CBRE China National Housing Price Index for January 2006 was 100, and as of July 2014 the Index stands at 160.1.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
