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[HONG KONG] Growth of investment in China's property sector continued to decline in December, dropping to 1 per cent, the slowest growth in nearly seven years even as national sales improved, official data showed on Tuesday.
Real estate investment, a major driver of the economy which affects more than 40 other sectors from cement to furniture, grew last month at its slowest pace since February 2009, according to data from the National Bureau of Statistics (NBS).
That growth rate is compared with an annual rise of 1.3 per cent in the first 11 months of 2015 and 10.5 per cent through 2014.
China's home prices continued to rise in December, up 7.7 per cent from a year earlier, quickening from November's 6.5 per cent rise, NBS said on Monday.
New housing starts declined 14 per cent as developers tried to sell off bloated inventories of unsold homes, though inventory floor area was still 15.6 per cent higher than a year ago, but down from 16.5 per cent growth in November. "Inventory increase is slowing, but the slowdown is caused by lower new starts, which doesn't mean demand is growing stronger. With the demand not so strong, the way to maintain a low inventory level is to build even less," CLSA analyst Nicole Wong said.
Property sales hit 1.3 billion square metres in December, climbing 17.6 per cent from November and 6.5 per cent from a year ago.
Given the nascent recovery in the property sector, as demonstrated by rising home prices, polarization has become a more serious issue as demand is focused mainly on the major cities, while inventory in third- and fourth-tier markets, which account for around 60 per cent of national sales, remains high.
The Chinese government said last month it will undertake more measures this year to tackle property inventories, including helping migrant workers to buy homes in cities.
"The balance between demand and supply in the cities we're in has improved a lot... so we don't need to push for destocking in these cities," said an official of state-backed China Resources Land which has 74 per cent of its projects in major cities. "But we're not talking about the third-tier cities here. We are offering promotions in the smaller cities to push sales,"the official said.
Goldman Sachs analyst Yi Wang said in a research report last week the government should do more to promote destocking. "(Government should also) manage the supply carefully by supporting industry consolidation, rather than encouraging the premature resumption of property investment growth."